Correlation Between Suncorp and Liberty Financial
Can any of the company-specific risk be diversified away by investing in both Suncorp 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 Suncorp and Liberty Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Suncorp Group and Liberty Financial Group, you can compare the effects of market volatilities on Suncorp 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 Suncorp with a short position of Liberty Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Suncorp and Liberty Financial.
Diversification Opportunities for Suncorp and Liberty Financial
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Suncorp and Liberty is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Suncorp Group and Liberty Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Financial and Suncorp 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 Suncorp Group 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 Suncorp i.e., Suncorp and Liberty Financial go up and down completely randomly.
Pair Corralation between Suncorp and Liberty Financial
Assuming the 90 days trading horizon Suncorp Group is expected to generate 0.9 times more return on investment than Liberty Financial. However, Suncorp Group is 1.11 times less risky than Liberty Financial. It trades about -0.03 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 1,960 in Suncorp Group on September 26, 2024 and sell it today you would lose (23.00) from holding Suncorp Group or give up 1.17% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Suncorp Group vs. Liberty Financial Group
Performance |
| Timeline |
| Suncorp Group |
| Liberty Financial |
Suncorp and Liberty Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Suncorp and Liberty Financial
The main advantage of trading using opposite Suncorp and Liberty Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Suncorp 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.The idea behind Suncorp Group and Liberty Financial Group 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 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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