Correlation Between BrightView Holdings and Liquidity Services

Can any of the company-specific risk be diversified away by investing in both BrightView Holdings and Liquidity Services at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining BrightView Holdings and Liquidity Services into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BrightView Holdings and Liquidity Services, you can compare the effects of market volatilities on BrightView Holdings and Liquidity Services and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in BrightView Holdings with a short position of Liquidity Services. Check out your portfolio center. Please also check ongoing floating volatility patterns of BrightView Holdings and Liquidity Services.

Diversification Opportunities for BrightView Holdings and Liquidity Services

0.37

Correlation Coefficient

BrightView Holdings  Liquidity Services

Weak diversification

The 3 months correlation between BrightView and Liquidity is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding BrightView Holdings and Liquidity Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liquidity Services and BrightView Holdings is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on BrightView Holdings are associated (or correlated) with Liquidity Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liquidity Services has no effect on the direction of BrightView Holdings i.e., BrightView Holdings and Liquidity Services go up and down completely randomly.

Pair Corralation between BrightView Holdings and Liquidity Services

Allowing for the 90-day total investment horizon BrightView Holdings is expected to generate 4.65 times less return on investment than Liquidity Services. But when comparing it to its historical volatility, BrightView Holdings is 1.58 times less risky than Liquidity Services. It trades about 0.06 of its potential returns per unit of risk. Liquidity Services is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  2,256  in Liquidity Services on September 17, 2024 and sell it today you would earn a total of  1,298  from holding Liquidity Services or generate 57.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

BrightView Holdings  vs.  Liquidity Services

BrightView Holdings

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BrightView Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, BrightView Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Liquidity Services

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Liquidity Services are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental indicators, Liquidity Services unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BrightView Holdings and Liquidity Services

The main advantage of trading using opposite BrightView Holdings and Liquidity Services positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BrightView Holdings position performs unexpectedly, Liquidity Services can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Liquidity Services will offset losses from the drop in Liquidity Services' long position.

The idea behind BrightView Holdings and Liquidity Services pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.