Correlation Between Energy Resources and Liberty Financial
Can any of the company-specific risk be diversified away by investing in both Energy Resources and Liberty Financial 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 Energy Resources and Liberty Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Energy Resources and Liberty Financial Group, you can compare the effects of market volatilities on Energy Resources and Liberty Financial 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 Energy Resources with a short position of Liberty Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energy Resources and Liberty Financial.
Diversification Opportunities for Energy Resources and Liberty Financial
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Energy and Liberty is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Energy Resources and Liberty Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Financial and Energy Resources 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 Energy Resources are associated (or correlated) with Liberty Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liberty Financial has no effect on the direction of Energy Resources i.e., Energy Resources and Liberty Financial go up and down completely randomly.
Pair Corralation between Energy Resources and Liberty Financial
Assuming the 90 days trading horizon Energy Resources is expected to generate 21.13 times more return on investment than Liberty Financial. However, Energy Resources is 21.13 times more volatile than Liberty Financial Group. It trades about 0.2 of its potential returns per unit of risk. Liberty Financial Group is currently generating about -0.09 per unit of risk. If you would invest 0.20 in Energy Resources on September 26, 2024 and sell it today you would earn a total of 0.10 from holding Energy Resources or generate 50.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Energy Resources vs. Liberty Financial Group
Performance |
| Timeline |
| Energy Resources |
| Liberty Financial |
Energy Resources and Liberty Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Energy Resources and Liberty Financial
The main advantage of trading using opposite Energy Resources and Liberty Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energy Resources position performs unexpectedly, Liberty Financial 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 Financial will offset losses from the drop in Liberty Financial's long position.| Energy Resources vs. Truscott Mining Corp | Energy Resources vs. Steamships Trading | Energy Resources vs. Centuria Industrial Reit | Energy Resources vs. Stelar Metals |
| Liberty Financial vs. Energy Resources | Liberty Financial vs. 88 Energy | Liberty Financial vs. Amani Gold | Liberty Financial vs. A1 Investments Resources |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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