Correlation Between Livent Corp and Blue Biofuels

Can any of the company-specific risk be diversified away by investing in both Livent Corp and Blue Biofuels 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 Livent Corp and Blue Biofuels into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Livent Corp and Blue Biofuels

0.24

Correlation Coefficient

Livent Corp  Blue Biofuels

Modest diversification

The 3 months correlation between Livent and Blue is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Livent Corp and Blue Biofuels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blue Biofuels and Livent Corp 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 Livent Corp are associated (or correlated) with Blue Biofuels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blue Biofuels has no effect on the direction of Livent Corp i.e., Livent Corp and Blue Biofuels go up and down completely randomly.

Pair Corralation between Livent Corp and Blue Biofuels

If you would invest  12.00  in Blue Biofuels on September 17, 2024 and sell it today you would earn a total of  0.00  from holding Blue Biofuels or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	1.56%
Values	Daily Returns

Livent Corp  vs.  Blue Biofuels

Livent Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Livent Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical indicators, Livent Corp is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Blue Biofuels

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Blue Biofuels are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Blue Biofuels may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Livent Corp and Blue Biofuels

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

The idea behind Livent Corp and Blue Biofuels 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.