Correlation Between FirstService Corp and Liberty Gold

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

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

Diversification Opportunities for FirstService Corp and Liberty Gold

-0.79

Correlation Coefficient

FirstService Corp  Liberty Gold

Pay attention - limited upside

The 3 months correlation between FirstService and Liberty is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding FirstService Corp and Liberty Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Gold Corp and FirstService Corp 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 FirstService Corp are associated (or correlated) with Liberty Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liberty Gold Corp has no effect on the direction of FirstService Corp i.e., FirstService Corp and Liberty Gold go up and down completely randomly.

Pair Corralation between FirstService Corp and Liberty Gold

Assuming the 90 days trading horizon FirstService Corp is expected to under-perform the Liberty Gold. But the stock apears to be less risky and, when comparing its historical volatility, FirstService Corp is 3.11 times less risky than Liberty Gold. The stock trades about -0.09 of its potential returns per unit of risk. The Liberty Gold Corp is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  26.00  in Liberty Gold Corp on December 26, 2024 and sell it today you would earn a total of  10.00  from holding Liberty Gold Corp or generate 38.46% return on investment over 90 days.

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

FirstService Corp  vs.  Liberty Gold Corp

FirstService Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days FirstService Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Liberty Gold Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Gold Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Liberty Gold displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FirstService Corp and Liberty Gold

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

The idea behind FirstService Corp and Liberty Gold Corp 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.