Correlation Between Fresh Grapes and LQR House

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

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

Diversification Opportunities for Fresh Grapes and LQR House

-0.62

Correlation Coefficient

Fresh Grapes  LQR House

Excellent diversification

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

Pair Corralation between Fresh Grapes and LQR House

Given the investment horizon of 90 days Fresh Grapes LLC is expected to under-perform the LQR House. In addition to that, Fresh Grapes is 1.05 times more volatile than LQR House Common. It trades about -0.03 of its total potential returns per unit of risk. LQR House Common is currently generating about 0.19 per unit of volatility. 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

Fresh Grapes LLC  vs.  LQR House Common

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.

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.

Pair Trading with Fresh Grapes and LQR House

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

The idea behind Fresh Grapes LLC and LQR House Common 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.