Correlation Between CHEVRON - and LIBERTY DEFENSE
Can any of the company-specific risk be diversified away by investing in both CHEVRON - and LIBERTY DEFENSE 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 CHEVRON - and LIBERTY DEFENSE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CHEVRON Dusseldorf and LIBERTY DEFENSE H, you can compare the effects of market volatilities on CHEVRON - and LIBERTY DEFENSE 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 CHEVRON - with a short position of LIBERTY DEFENSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHEVRON - and LIBERTY DEFENSE.
Diversification Opportunities for CHEVRON - and LIBERTY DEFENSE
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between CHEVRON and LIBERTY is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding CHEVRON Dusseldorf and LIBERTY DEFENSE H in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LIBERTY DEFENSE H and CHEVRON - 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 CHEVRON Dusseldorf are associated (or correlated) with LIBERTY DEFENSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LIBERTY DEFENSE H has no effect on the direction of CHEVRON - i.e., CHEVRON - and LIBERTY DEFENSE go up and down completely randomly.
Pair Corralation between CHEVRON - and LIBERTY DEFENSE
Assuming the 90 days trading horizon CHEVRON - is expected to generate 12.95 times less return on investment than LIBERTY DEFENSE. But when comparing it to its historical volatility, CHEVRON Dusseldorf is 11.15 times less risky than LIBERTY DEFENSE. It trades about 0.05 of its potential returns per unit of risk. LIBERTY DEFENSE H is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 80.00 in LIBERTY DEFENSE H on October 16, 2024 and sell it today you would lose (24.00) from holding LIBERTY DEFENSE H or give up 30.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CHEVRON Dusseldorf vs. LIBERTY DEFENSE H
Performance |
| Timeline |
| CHEVRON Dusseldorf |
| LIBERTY DEFENSE H |
CHEVRON - and LIBERTY DEFENSE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CHEVRON - and LIBERTY DEFENSE
The main advantage of trading using opposite CHEVRON - and LIBERTY DEFENSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CHEVRON - position performs unexpectedly, LIBERTY DEFENSE 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 LIBERTY DEFENSE will offset losses from the drop in LIBERTY DEFENSE's long position.The idea behind CHEVRON Dusseldorf and LIBERTY DEFENSE H 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.| LIBERTY DEFENSE vs. ASSA ABLOY AB | LIBERTY DEFENSE vs. Halma plc | LIBERTY DEFENSE vs. Allegion plc | LIBERTY DEFENSE vs. Superior Plus 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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