Correlation Between RH and LightInTheBox Holding

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

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

Diversification Opportunities for RH and LightInTheBox Holding

-0.48

Correlation Coefficient

RH  LightInTheBox Holding

Very good diversification

The 3 months correlation between RH and LightInTheBox is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding RH and LightInTheBox Holding Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LightInTheBox Holding and RH 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 RH 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 RH i.e., RH and LightInTheBox Holding go up and down completely randomly.

Pair Corralation between RH and LightInTheBox Holding

Allowing for the 90-day total investment horizon RH is expected to generate 0.59 times more return on investment than LightInTheBox Holding. However, RH is 1.7 times less risky than LightInTheBox Holding. It trades about 0.07 of its potential returns per unit of risk. LightInTheBox Holding Co is currently generating about -0.04 per unit of risk. If you would invest  21,568  in RH on August 24, 2024 and sell it today you would earn a total of  15,233  from holding RH or generate 70.63% return on investment over 90 days.

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

RH  vs.  LightInTheBox Holding Co

RH

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in RH are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating technical indicators, RH demonstrated solid returns over the last few months and may actually be approaching a breakup point.

LightInTheBox Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LightInTheBox Holding Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, LightInTheBox Holding is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with RH and LightInTheBox Holding

The main advantage of trading using opposite RH and LightInTheBox Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RH 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 RH 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.

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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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.