Correlation Between LQR House and Fresh Grapes

Can any of the company-specific risk be diversified away by investing in both LQR House and Fresh Grapes 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 Fresh Grapes 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 Fresh Grapes LLC, you can compare the effects of market volatilities on LQR House and Fresh Grapes 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 Fresh Grapes. Check out your portfolio center. Please also check ongoing floating volatility patterns of LQR House and Fresh Grapes.

Diversification Opportunities for LQR House and Fresh Grapes

-0.62

Correlation Coefficient

LQR House  Fresh Grapes

Excellent diversification

The 3 months correlation between LQR and Fresh is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding LQR House Common and Fresh Grapes LLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fresh Grapes LLC 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 Fresh Grapes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fresh Grapes LLC has no effect on the direction of LQR House i.e., LQR House and Fresh Grapes go up and down completely randomly.

Pair Corralation between LQR House and Fresh Grapes

Considering the 90-day investment horizon LQR House Common is expected to generate 0.95 times more return on investment than Fresh Grapes. However, LQR House Common is 1.05 times less risky than Fresh Grapes. It trades about 0.19 of its potential returns per unit of risk. Fresh Grapes LLC is currently generating about -0.03 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 Against
Strength	Weak
Accuracy	87.3%
Values	Daily Returns

LQR House Common  vs.  Fresh Grapes LLC

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.

Fresh Grapes LLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fresh Grapes LLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with LQR House and Fresh Grapes

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

The idea behind LQR House Common and Fresh Grapes LLC 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.