Correlation Between Beach Energy and Liberty Financial

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Can any of the company-specific risk be diversified away by investing in both Beach Energy 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 Beach Energy and Liberty Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Beach Energy and Liberty Financial Group, you can compare the effects of market volatilities on Beach Energy 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 Beach Energy with a short position of Liberty Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beach Energy and Liberty Financial.

Diversification Opportunities for Beach Energy and Liberty Financial

-0.01
  Correlation Coefficient

Good diversification

The 3 months correlation between Beach and Liberty is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Beach Energy and Liberty Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Financial and Beach Energy 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 Beach Energy 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 Beach Energy i.e., Beach Energy and Liberty Financial go up and down completely randomly.

Pair Corralation between Beach Energy and Liberty Financial

Assuming the 90 days trading horizon Beach Energy is expected to generate 1.38 times less return on investment than Liberty Financial. But when comparing it to its historical volatility, Beach Energy is 1.21 times less risky than Liberty Financial. It trades about 0.09 of its potential returns per unit of risk. Liberty Financial Group is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  325.00  in Liberty Financial Group on December 27, 2024 and sell it today you would earn a total of  43.00  from holding Liberty Financial Group or generate 13.23% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy98.41%
ValuesDaily Returns

Beach Energy  vs.  Liberty Financial Group

 Performance 
       Timeline  
Beach Energy 

Risk-Adjusted Performance

OK

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Beach Energy are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Beach Energy may actually be approaching a critical reversion point that can send shares even higher in April 2025.
Liberty Financial 

Risk-Adjusted Performance

OK

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Financial Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Liberty Financial unveiled solid returns over the last few months and may actually be approaching a breakup point.

Beach Energy and Liberty Financial Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Beach Energy and Liberty Financial

The main advantage of trading using opposite Beach Energy and Liberty Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Beach Energy 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 Beach Energy 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.
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.

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