Correlation Between Deneb Investments and Libstar Holdings

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

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

Diversification Opportunities for Deneb Investments and Libstar Holdings

-0.25

Correlation Coefficient

Deneb Investments  Libstar Holdings

Very good diversification

The 3 months correlation between Deneb and Libstar is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Deneb Investments and Libstar Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Libstar Holdings and Deneb Investments 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 Deneb Investments are associated (or correlated) with Libstar Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Libstar Holdings has no effect on the direction of Deneb Investments i.e., Deneb Investments and Libstar Holdings go up and down completely randomly.

Pair Corralation between Deneb Investments and Libstar Holdings

Assuming the 90 days trading horizon Deneb Investments is expected to generate 0.47 times more return on investment than Libstar Holdings. However, Deneb Investments is 2.12 times less risky than Libstar Holdings. It trades about 0.07 of its potential returns per unit of risk. Libstar Holdings is currently generating about -0.04 per unit of risk. If you would invest  20,200  in Deneb Investments on December 30, 2024 and sell it today you would earn a total of  1,700  from holding Deneb Investments or generate 8.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Deneb Investments  vs.  Libstar Holdings

Deneb Investments

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Deneb Investments are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Deneb Investments may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Libstar Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Libstar Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Deneb Investments and Libstar Holdings

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

The idea behind Deneb Investments and Libstar 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.

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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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.