Correlation Between Allhome Corp and Liberty Flour

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

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

Diversification Opportunities for Allhome Corp and Liberty Flour

-0.26

Correlation Coefficient

Allhome Corp  Liberty Flour

Very good diversification

The 3 months correlation between Allhome and Liberty is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Allhome Corp and Liberty Flour Mills in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Flour Mills and Allhome 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 Allhome Corp are associated (or correlated) with Liberty Flour. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liberty Flour Mills has no effect on the direction of Allhome Corp i.e., Allhome Corp and Liberty Flour go up and down completely randomly.

Pair Corralation between Allhome Corp and Liberty Flour

Assuming the 90 days trading horizon Allhome Corp is expected to under-perform the Liberty Flour. But the stock apears to be less risky and, when comparing its historical volatility, Allhome Corp is 3.44 times less risky than Liberty Flour. The stock trades about -0.15 of its potential returns per unit of risk. The Liberty Flour Mills is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,476  in Liberty Flour Mills on October 20, 2024 and sell it today you would earn a total of  122.00  from holding Liberty Flour Mills or generate 8.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	67.8%
Values	Daily Returns

Allhome Corp  vs.  Liberty Flour Mills

Allhome Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Allhome Corp 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 basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Liberty Flour Mills

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Flour Mills are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, Liberty Flour exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Allhome Corp and Liberty Flour

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

The idea behind Allhome Corp and Liberty Flour Mills 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..