Correlation Between Euro Tech and LiqTech International

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

Diversification Opportunities for Euro Tech and LiqTech International

0.26
  Correlation Coefficient

Modest diversification

The 3 months correlation between Euro and LiqTech is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Euro Tech Holdings and LiqTech International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LiqTech International and Euro Tech 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 Euro Tech Holdings are associated (or correlated) with LiqTech International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LiqTech International has no effect on the direction of Euro Tech i.e., Euro Tech and LiqTech International go up and down completely randomly.

Pair Corralation between Euro Tech and LiqTech International

Given the investment horizon of 90 days Euro Tech Holdings is expected to under-perform the LiqTech International. But the stock apears to be less risky and, when comparing its historical volatility, Euro Tech Holdings is 1.7 times less risky than LiqTech International. The stock trades about -0.19 of its potential returns per unit of risk. The LiqTech International is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  165.00  in LiqTech International on October 23, 2024 and sell it today you would earn a total of  16.00  from holding LiqTech International or generate 9.7% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Euro Tech Holdings  vs.  LiqTech International

 Performance 
       Timeline  
Euro Tech Holdings 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Euro Tech Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.
LiqTech International 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days LiqTech International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, LiqTech International is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Euro Tech and LiqTech International Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Euro Tech and LiqTech International

The main advantage of trading using opposite Euro Tech and LiqTech International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Euro Tech position performs unexpectedly, LiqTech International 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 LiqTech International will offset losses from the drop in LiqTech International's long position.
The idea behind Euro Tech Holdings and LiqTech International 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 Stocks Directory module to find actively traded stocks across global markets.

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