Correlation Between Lightinthebox Holding and Farfetch

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

Diversification Opportunities for Lightinthebox Holding and Farfetch

0.31
  Correlation Coefficient

Weak diversification

The 3 months correlation between Lightinthebox and Farfetch is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Lightinthebox Holding Co and Farfetch Ltd Cl in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on Farfetch Ltd Cl and Lightinthebox Holding 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 Lightinthebox Holding Co are associated (or correlated) with Farfetch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Farfetch Ltd Cl has no effect on the direction of Lightinthebox Holding i.e., Lightinthebox Holding and Farfetch go up and down completely randomly.

Pair Corralation between Lightinthebox Holding and Farfetch

Given the investment horizon of 90 days Lightinthebox Holding Co is expected to generate 1.35 times more return on investment than Farfetch. However, Lightinthebox Holding is 1.35 times more volatile than Farfetch Ltd Cl. It trades about 0.04 of its potential returns per unit of risk. Farfetch Ltd Cl is currently generating about 0.01 per unit of risk. If you would invest  81.00  in Lightinthebox Holding Co on February 17, 2022 and sell it today you would earn a total of  36.00  from holding Lightinthebox Holding Co or generate 44.44% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy99.8%
ValuesDaily Returns

Lightinthebox Holding Co  vs.  Farfetch Ltd Cl

 Performance (%) 
      Timeline 
Lightinthebox Holding 
Lightinthebox Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Lightinthebox Holding Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Lightinthebox Holding may actually be approaching a critical reversion point that can send shares even higher in June 2022.

Lightinthebox Price Channel

Farfetch Ltd Cl 
Farfetch Performance
0 of 100
Over the last 90 days Farfetch Ltd Cl has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in June 2022. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Farfetch Price Channel

Lightinthebox Holding and Farfetch Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Lightinthebox Holding and Farfetch

The main advantage of trading using opposite Lightinthebox Holding and Farfetch positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lightinthebox Holding position performs unexpectedly, Farfetch 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 Farfetch will offset losses from the drop in Farfetch's long position.
The idea behind Lightinthebox Holding Co and Farfetch Ltd Cl 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.

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