Correlation Between Liberty All and Mai Managed

Can any of the company-specific risk be diversified away by investing in both Liberty All and Mai Managed 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 Mai Managed 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 Mai Managed Volatility, you can compare the effects of market volatilities on Liberty All and Mai Managed 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 Mai Managed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Liberty All and Mai Managed.

Diversification Opportunities for Liberty All and Mai Managed

0.87

Correlation Coefficient

Liberty All  Mai Managed

Very poor diversification

The 3 months correlation between Liberty and Mai is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Liberty All Star and Mai Managed Volatility in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mai Managed Volatility 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 Mai Managed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mai Managed Volatility has no effect on the direction of Liberty All i.e., Liberty All and Mai Managed go up and down completely randomly.

Pair Corralation between Liberty All and Mai Managed

Considering the 90-day investment horizon Liberty All Star is expected to generate 3.72 times more return on investment than Mai Managed. However, Liberty All is 3.72 times more volatile than Mai Managed Volatility. It trades about 0.09 of its potential returns per unit of risk. Mai Managed Volatility is currently generating about 0.12 per unit of risk. If you would invest  510.00  in Liberty All Star on September 29, 2024 and sell it today you would earn a total of  65.00  from holding Liberty All Star or generate 12.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Liberty All Star  vs.  Mai Managed Volatility

Liberty All Star

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty All Star are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. Despite nearly stable basic indicators, Liberty All is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Mai Managed Volatility

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mai Managed Volatility are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Mai Managed is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Liberty All and Mai Managed

The main advantage of trading using opposite Liberty All and Mai Managed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Liberty All position performs unexpectedly, Mai Managed 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 Mai Managed will offset losses from the drop in Mai Managed's long position.

The idea behind Liberty All Star and Mai Managed Volatility 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.