Correlation Between Butterfly Network and Liberty Defense

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

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

Diversification Opportunities for Butterfly Network and Liberty Defense

0.11

Correlation Coefficient

Butterfly Network  Liberty Defense

Average diversification

The 3 months correlation between Butterfly and Liberty is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Butterfly Network 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 Butterfly Network 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 Butterfly Network 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 Butterfly Network i.e., Butterfly Network and Liberty Defense go up and down completely randomly.

Pair Corralation between Butterfly Network and Liberty Defense

Given the investment horizon of 90 days Butterfly Network is expected to under-perform the Liberty Defense. But the stock apears to be less risky and, when comparing its historical volatility, Butterfly Network is 1.1 times less risky than Liberty Defense. The stock trades about -0.04 of its potential returns per unit of risk. The Liberty Defense Holdings is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  59.00  in Liberty Defense Holdings on December 29, 2024 and sell it today you would earn a total of  21.00  from holding Liberty Defense Holdings or generate 35.59% return on investment over 90 days.

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

Butterfly Network  vs.  Liberty Defense Holdings

Butterfly Network

Risk-Adjusted Performance

Very Weak

Over the last 90 days Butterfly Network 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 essential indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Liberty Defense Holdings

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Defense Holdings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal technical and fundamental indicators, Liberty Defense reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Butterfly Network and Liberty Defense

The main advantage of trading using opposite Butterfly Network and Liberty Defense positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Butterfly Network 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 Butterfly Network 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.