Correlation Between DLH Holdings and LiCycle Holdings

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

By analyzing existing cross correlation between DLH Holdings Corp and LiCycle Holdings Corp, you can compare the effects of market volatilities on DLH Holdings and LiCycle Holdings 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 DLH Holdings with a short position of LiCycle Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of DLH Holdings and LiCycle Holdings.

Diversification Opportunities for DLH Holdings and LiCycle Holdings

-0.27

Correlation Coefficient

DLH Holdings  LiCycle Holdings

Very good diversification

The 3 months correlation between DLH and LiCycle is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding DLH Holdings Corp and LiCycle Holdings Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LiCycle Holdings Corp and DLH 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 DLH Holdings Corp are associated (or correlated) with LiCycle Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LiCycle Holdings Corp has no effect on the direction of DLH Holdings i.e., DLH Holdings and LiCycle Holdings go up and down completely randomly.

Pair Corralation between DLH Holdings and LiCycle Holdings

Given the investment horizon of 90 days DLH Holdings Corp is expected to under-perform the LiCycle Holdings. But the stock apears to be less risky and, when comparing its historical volatility, DLH Holdings Corp is 4.19 times less risky than LiCycle Holdings. The stock trades about -0.1 of its potential returns per unit of risk. The LiCycle Holdings Corp is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  70.00  in LiCycle Holdings Corp on February 21, 2024 and sell it today you would lose (10.68) from holding LiCycle Holdings Corp or give up 15.26% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

DLH Holdings Corp  vs.  LiCycle Holdings Corp

DLH Holdings Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DLH Holdings Corp 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 technical indicators remain rather sound which may send shares a bit higher in June 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

LiCycle Holdings Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in LiCycle Holdings Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent fundamental indicators, LiCycle Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DLH Holdings and LiCycle Holdings

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

The idea behind DLH Holdings Corp and LiCycle Holdings Corp 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.