Correlation Between ECARX Holdings and LiveWire

Can any of the company-specific risk be diversified away by investing in both ECARX Holdings and LiveWire 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 ECARX Holdings and LiveWire into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ECARX Holdings Class and LiveWire Group, you can compare the effects of market volatilities on ECARX Holdings and LiveWire 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 ECARX Holdings with a short position of LiveWire. Check out your portfolio center. Please also check ongoing floating volatility patterns of ECARX Holdings and LiveWire.

Diversification Opportunities for ECARX Holdings and LiveWire

-0.45

Correlation Coefficient

ECARX Holdings  LiveWire

Very good diversification

The 3 months correlation between ECARX and LiveWire is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding ECARX Holdings Class and LiveWire Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LiveWire Group and ECARX 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 ECARX Holdings Class are associated (or correlated) with LiveWire. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LiveWire Group has no effect on the direction of ECARX Holdings i.e., ECARX Holdings and LiveWire go up and down completely randomly.

Pair Corralation between ECARX Holdings and LiveWire

Considering the 90-day investment horizon ECARX Holdings Class is expected to generate 1.3 times more return on investment than LiveWire. However, ECARX Holdings is 1.3 times more volatile than LiveWire Group. It trades about 0.02 of its potential returns per unit of risk. LiveWire Group is currently generating about -0.09 per unit of risk. If you would invest  193.00  in ECARX Holdings Class on September 26, 2024 and sell it today you would earn a total of  2.00  from holding ECARX Holdings Class or generate 1.04% return on investment over 90 days.

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

ECARX Holdings Class  vs.  LiveWire Group

ECARX Holdings Class

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ECARX Holdings Class are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental indicators, ECARX Holdings is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

LiveWire Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LiveWire Group has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unfluctuating performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with ECARX Holdings and LiveWire

The main advantage of trading using opposite ECARX Holdings and LiveWire positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ECARX Holdings position performs unexpectedly, LiveWire 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 LiveWire will offset losses from the drop in LiveWire's long position.

The idea behind ECARX Holdings Class and LiveWire Group 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.

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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.