Correlation Between Brinks and Liberty Defense

Can any of the company-specific risk be diversified away by investing in both Brinks 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 Brinks and Liberty Defense into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Brinks Company and Liberty Defense Holdings, you can compare the effects of market volatilities on Brinks 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 Brinks with a short position of Liberty Defense. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brinks and Liberty Defense.

Diversification Opportunities for Brinks and Liberty Defense

0.59

Correlation Coefficient

Brinks  Liberty Defense

Very weak diversification

The 3 months correlation between Brinks and Liberty is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Brinks Company and Liberty Defense Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Defense Holdings and Brinks 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 Brinks Company 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 Holdings has no effect on the direction of Brinks i.e., Brinks and Liberty Defense go up and down completely randomly.

Pair Corralation between Brinks and Liberty Defense

Considering the 90-day investment horizon Brinks Company is expected to under-perform the Liberty Defense. But the stock apears to be less risky and, when comparing its historical volatility, Brinks Company is 5.92 times less risky than Liberty Defense. The stock trades about -0.16 of its potential returns per unit of risk. The Liberty Defense Holdings is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  68.00  in Liberty Defense Holdings on October 5, 2024 and sell it today you would lose (16.00) from holding Liberty Defense Holdings or give up 23.53% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Brinks Company  vs.  Liberty Defense Holdings

Brinks Company

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brinks Company has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Liberty Defense Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Liberty Defense Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Liberty Defense is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Brinks and Liberty Defense

The main advantage of trading using opposite Brinks and Liberty Defense positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brinks 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 Brinks Company and Liberty Defense Holdings 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.

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.