Correlation Between LIV Capital and DHC Acquisition

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

By analyzing existing cross correlation between LIV Capital Acquisition and DHC Acquisition Corp, you can compare the effects of market volatilities on LIV Capital and DHC Acquisition 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 LIV Capital with a short position of DHC Acquisition. Check out your portfolio center. Please also check ongoing floating volatility patterns of LIV Capital and DHC Acquisition.

Diversification Opportunities for LIV Capital and DHC Acquisition

0.34

Correlation Coefficient

LIV Capital  DHC Acquisition

Weak diversification

The 3 months correlation between LIV and DHC is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding LIV Capital Acquisition and DHC Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DHC Acquisition Corp and LIV Capital 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 LIV Capital Acquisition are associated (or correlated) with DHC Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DHC Acquisition Corp has no effect on the direction of LIV Capital i.e., LIV Capital and DHC Acquisition go up and down completely randomly.

Pair Corralation between LIV Capital and DHC Acquisition

Given the investment horizon of 90 days LIV Capital Acquisition is expected to generate 0.24 times more return on investment than DHC Acquisition. However, LIV Capital Acquisition is 4.1 times less risky than DHC Acquisition. It trades about 0.2 of its potential returns per unit of risk. DHC Acquisition Corp is currently generating about 0.04 per unit of risk. If you would invest  1,024  in LIV Capital Acquisition on September 16, 2024 and sell it today you would earn a total of  38.00  from holding LIV Capital Acquisition or generate 3.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.31%
Values	Daily Returns

LIV Capital Acquisition  vs.  DHC Acquisition Corp

LIV Capital Acquisition

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LIV Capital Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, LIV Capital is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

DHC Acquisition Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DHC Acquisition Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, DHC Acquisition is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with LIV Capital and DHC Acquisition

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

The idea behind LIV Capital Acquisition and DHC Acquisition Corp 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.