Correlation Between LQR House and Eastside Distilling

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

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

Diversification Opportunities for LQR House and Eastside Distilling

0.75

Correlation Coefficient

LQR House  Eastside Distilling

Poor diversification

The 3 months correlation between LQR and Eastside is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding LQR House Common and Eastside Distilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastside Distilling and LQR House 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 LQR House Common are associated (or correlated) with Eastside Distilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eastside Distilling has no effect on the direction of LQR House i.e., LQR House and Eastside Distilling go up and down completely randomly.

Pair Corralation between LQR House and Eastside Distilling

Considering the 90-day investment horizon LQR House Common is expected to generate 1.3 times more return on investment than Eastside Distilling. However, LQR House is 1.3 times more volatile than Eastside Distilling. It trades about 0.19 of its potential returns per unit of risk. Eastside Distilling is currently generating about 0.15 per unit of risk. 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	Significant
Accuracy	87.3%
Values	Daily Returns

LQR House Common  vs.  Eastside Distilling

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.

Eastside Distilling

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Eastside Distilling are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Eastside Distilling unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LQR House and Eastside Distilling

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

The idea behind LQR House Common and Eastside Distilling 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.