Correlation Between New Wave and LiveOne

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

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

Diversification Opportunities for New Wave and LiveOne

0.06

Correlation Coefficient

New Wave  LiveOne

Significant diversification

The 3 months correlation between New and LiveOne is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding New Wave Holdings and LiveOne in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LiveOne and New Wave 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 New Wave Holdings are associated (or correlated) with LiveOne. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LiveOne has no effect on the direction of New Wave i.e., New Wave and LiveOne go up and down completely randomly.

Pair Corralation between New Wave and LiveOne

Assuming the 90 days horizon New Wave Holdings is expected to generate 3.88 times more return on investment than LiveOne. However, New Wave is 3.88 times more volatile than LiveOne. It trades about 0.11 of its potential returns per unit of risk. LiveOne is currently generating about -0.05 per unit of risk. If you would invest  0.80  in New Wave Holdings on September 5, 2024 and sell it today you would earn a total of  0.41  from holding New Wave Holdings or generate 51.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

New Wave Holdings  vs.  LiveOne

New Wave Holdings

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in New Wave Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, New Wave reported solid returns over the last few months and may actually be approaching a breakup point.

LiveOne

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LiveOne has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with New Wave and LiveOne

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

The idea behind New Wave Holdings and LiveOne 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.