Correlation Between LiCycle Holdings and Erayak Power
Can any of the company-specific risk be diversified away by investing in both LiCycle Holdings and Erayak Power 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 LiCycle Holdings and Erayak Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LiCycle Holdings Corp and Erayak Power Solution, you can compare the effects of market volatilities on LiCycle Holdings and Erayak Power 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 LiCycle Holdings with a short position of Erayak Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of LiCycle Holdings and Erayak Power.
Diversification Opportunities for LiCycle Holdings and Erayak Power
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between LiCycle and Erayak is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding LiCycle Holdings Corp and Erayak Power Solution in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Erayak Power Solution and LiCycle Holdings 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 LiCycle Holdings Corp are associated (or correlated) with Erayak Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Erayak Power Solution has no effect on the direction of LiCycle Holdings i.e., LiCycle Holdings and Erayak Power go up and down completely randomly.
Pair Corralation between LiCycle Holdings and Erayak Power
Given the investment horizon of 90 days LiCycle Holdings is expected to generate 4.25 times less return on investment than Erayak Power. But when comparing it to its historical volatility, LiCycle Holdings Corp is 1.02 times less risky than Erayak Power. It trades about 0.04 of its potential returns per unit of risk. Erayak Power Solution is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 71.00 in Erayak Power Solution on August 30, 2024 and sell it today you would earn a total of 49.00 from holding Erayak Power Solution or generate 69.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
LiCycle Holdings Corp vs. Erayak Power Solution
Performance |
| Timeline |
| LiCycle Holdings Corp |
| Erayak Power Solution |
LiCycle Holdings and Erayak Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LiCycle Holdings and Erayak Power
The main advantage of trading using opposite LiCycle Holdings and Erayak Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LiCycle Holdings position performs unexpectedly, Erayak Power 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 Erayak Power will offset losses from the drop in Erayak Power's long position.| LiCycle Holdings vs. Casella Waste Systems | LiCycle Holdings vs. Perma Fix Environmental Svcs | LiCycle Holdings vs. Montrose Environmental Grp | LiCycle Holdings vs. LanzaTech Global |
| Erayak Power vs. Solid Power | Erayak Power vs. Enovix Corp | Erayak Power vs. Microvast Holdings | Erayak Power vs. LiCycle Holdings Corp |
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 the Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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