Correlation Between Innovation Beverage and LQR House

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

By analyzing existing cross correlation between Innovation Beverage Group and LQR House Common, you can compare the effects of market volatilities on Innovation Beverage and LQR House 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 Innovation Beverage with a short position of LQR House. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innovation Beverage and LQR House.

Diversification Opportunities for Innovation Beverage and LQR House

0.01

Correlation Coefficient

Innovation Beverage  LQR House

Significant diversification

The 3 months correlation between Innovation and LQR is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Innovation Beverage Group and LQR House Common in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LQR House Common and Innovation Beverage 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 Innovation Beverage Group are associated (or correlated) with LQR House. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LQR House Common has no effect on the direction of Innovation Beverage i.e., Innovation Beverage and LQR House go up and down completely randomly.

Pair Corralation between Innovation Beverage and LQR House

Considering the 90-day investment horizon Innovation Beverage Group is expected to under-perform the LQR House. In addition to that, Innovation Beverage is 1.27 times more volatile than LQR House Common. It trades about -0.03 of its total potential returns per unit of risk. LQR House Common is currently generating about 0.19 per unit of volatility. If you would invest  55.00  in LQR House Common on September 29, 2024 and sell it today you would earn a total of  60.00  from holding LQR House Common or generate 109.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	87.3%
Values	Daily Returns

Innovation Beverage Group  vs.  LQR House Common

Innovation Beverage

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Innovation Beverage Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental drivers remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

LQR House Common

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days LQR House Common has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively unfluctuating basic indicators, LQR House reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Innovation Beverage and LQR House

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

The idea behind Innovation Beverage Group and LQR House Common 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.