Correlation Between Dupont Denemours and Lightinthebox Holding

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Can any of the company-specific risk be diversified away by investing in both Dupont Denemours and Lightinthebox Holding 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 Dupont Denemours and Lightinthebox Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dupont Denemours and Lightinthebox Holding Co, you can compare the effects of market volatilities on Dupont Denemours and Lightinthebox Holding 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 Dupont Denemours with a short position of Lightinthebox Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dupont Denemours and Lightinthebox Holding.

Diversification Opportunities for Dupont Denemours and Lightinthebox Holding

0.5
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Dupont and Lightinthebox is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Dupont Denemours and Lightinthebox Holding Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lightinthebox Holding and Dupont Denemours 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 Dupont Denemours are associated (or correlated) with Lightinthebox Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lightinthebox Holding has no effect on the direction of Dupont Denemours i.e., Dupont Denemours and Lightinthebox Holding go up and down completely randomly.

Pair Corralation between Dupont Denemours and Lightinthebox Holding

Allowing for the 90-day total investment horizon Dupont Denemours is expected to under-perform the Lightinthebox Holding. But the stock apears to be less risky and, when comparing its historical volatility, Dupont Denemours is 2.55 times less risky than Lightinthebox Holding. The stock trades about -0.03 of its potential returns per unit of risk. The Lightinthebox Holding Co is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  111.00  in Lightinthebox Holding Co on May 14, 2022 and sell it today you would lose (11.00)  from holding Lightinthebox Holding Co or give up 9.91% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Dupont Denemours  vs.  Lightinthebox Holding Co

 Performance (%) 
       Timeline  
Dupont Denemours 
Dupont Performance
0 of 100
Over the last 90 days Dupont Denemours has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Dupont Denemours is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Dupont Price Channel

Lightinthebox Holding 
Lightinthebox Performance
0 of 100
Over the last 90 days Lightinthebox Holding Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Lightinthebox Price Channel

Dupont Denemours and Lightinthebox Holding Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Dupont Denemours and Lightinthebox Holding

The main advantage of trading using opposite Dupont Denemours and Lightinthebox Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dupont Denemours position performs unexpectedly, Lightinthebox Holding 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 Lightinthebox Holding will offset losses from the drop in Lightinthebox Holding's long position.
The idea behind Dupont Denemours and Lightinthebox Holding Co 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.
Check out your portfolio center. 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.

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