Correlation Between LIV Capital and Investcorp Europe

Can any of the company-specific risk be diversified away by investing in both LIV Capital and Investcorp Europe 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 Investcorp Europe 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 Investcorp Europe Acquisition, you can compare the effects of market volatilities on LIV Capital and Investcorp Europe 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 Investcorp Europe. Check out your portfolio center. Please also check ongoing floating volatility patterns of LIV Capital and Investcorp Europe.

Diversification Opportunities for LIV Capital and Investcorp Europe

0.51

Correlation Coefficient

LIV Capital  Investcorp Europe

Very weak diversification

The 3 months correlation between LIV and Investcorp is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding LIV Capital Acquisition and Investcorp Europe Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investcorp Europe 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 Investcorp Europe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investcorp Europe has no effect on the direction of LIV Capital i.e., LIV Capital and Investcorp Europe go up and down completely randomly.

Pair Corralation between LIV Capital and Investcorp Europe

If you would invest  3.60  in Investcorp Europe Acquisition on September 15, 2024 and sell it today you would lose (1.59) from holding Investcorp Europe Acquisition or give up 44.17% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	3.7%
Values	Daily Returns

LIV Capital Acquisition  vs.  Investcorp Europe Acquisition

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. In spite of fairly stable fundamental drivers, LIV Capital is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Investcorp Europe

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Investcorp Europe Acquisition are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal fundamental drivers, Investcorp Europe showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LIV Capital and Investcorp Europe

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

The idea behind LIV Capital Acquisition and Investcorp Europe Acquisition 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.