Correlation Between Euro Tech and LiqTech International

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

-0.38

Correlation Coefficient

Euro Tech  LiqTech International

Very good diversification

The 3 months correlation between Euro and LiqTech is -0.38. 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 generate 0.73 times more return on investment than LiqTech International. However, Euro Tech Holdings is 1.38 times less risky than LiqTech International. It trades about 0.0 of its potential returns per unit of risk. LiqTech International is currently generating about -0.01 per unit of risk. If you would invest  151.00  in Euro Tech Holdings on February 18, 2025 and sell it today you would lose (36.00) from holding Euro Tech Holdings or give up 23.84% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.6%
Values	Daily Returns

Euro Tech Holdings  vs.  LiqTech International

Euro Tech Holdings

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Euro Tech Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Euro Tech may actually be approaching a critical reversion point that can send shares even higher in June 2025.

LiqTech International

Risk-Adjusted Performance

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.

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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.