Correlation Between Liberty All and Emerald Banking
Can any of the company-specific risk be diversified away by investing in both Liberty All and Emerald Banking 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 Liberty All and Emerald Banking into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Liberty All Star and Emerald Banking And, you can compare the effects of market volatilities on Liberty All and Emerald Banking 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 Liberty All with a short position of Emerald Banking. Check out your portfolio center. Please also check ongoing floating volatility patterns of Liberty All and Emerald Banking.
Diversification Opportunities for Liberty All and Emerald Banking
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Liberty and Emerald is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Liberty All Star and Emerald Banking And in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerald Banking And and Liberty All 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 Liberty All Star are associated (or correlated) with Emerald Banking. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerald Banking And has no effect on the direction of Liberty All i.e., Liberty All and Emerald Banking go up and down completely randomly.
Pair Corralation between Liberty All and Emerald Banking
Considering the 90-day investment horizon Liberty All is expected to generate 1.52 times less return on investment than Emerald Banking. But when comparing it to its historical volatility, Liberty All Star is 1.67 times less risky than Emerald Banking. It trades about 0.1 of its potential returns per unit of risk. Emerald Banking And is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 2,047 in Emerald Banking And on August 29, 2024 and sell it today you would earn a total of 848.00 from holding Emerald Banking And or generate 41.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.6% |
| Values | Daily Returns |
Liberty All Star vs. Emerald Banking And
Performance |
| Timeline |
| Liberty All Star |
| Emerald Banking And |
Liberty All and Emerald Banking Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Liberty All and Emerald Banking
The main advantage of trading using opposite Liberty All and Emerald Banking positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Liberty All position performs unexpectedly, Emerald Banking 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 Emerald Banking will offset losses from the drop in Emerald Banking's long position.| Liberty All vs. Gabelli Global Small | Liberty All vs. MFS Investment Grade | Liberty All vs. Eaton Vance National | Liberty All vs. GAMCO Natural Resources |
| Emerald Banking vs. Emerald Banking And | Emerald Banking vs. Emerald Banking And | Emerald Banking vs. Emerald Banking And | Emerald Banking vs. Hennessy Small Cap |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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