Correlation Between Kaiser Aluminum and Liberty Resources

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

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

Diversification Opportunities for Kaiser Aluminum and Liberty Resources

0.05

Correlation Coefficient

Kaiser Aluminum  Liberty Resources

Significant diversification

The 3 months correlation between Kaiser and Liberty is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Kaiser Aluminum and Liberty Resources Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Resources and Kaiser Aluminum 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 Kaiser Aluminum are associated (or correlated) with Liberty Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liberty Resources has no effect on the direction of Kaiser Aluminum i.e., Kaiser Aluminum and Liberty Resources go up and down completely randomly.

Pair Corralation between Kaiser Aluminum and Liberty Resources

Given the investment horizon of 90 days Kaiser Aluminum is expected to generate 113.67 times less return on investment than Liberty Resources. But when comparing it to its historical volatility, Kaiser Aluminum is 5.72 times less risky than Liberty Resources. It trades about 0.0 of its potential returns per unit of risk. Liberty Resources Acquisition is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  6.50  in Liberty Resources Acquisition on October 26, 2024 and sell it today you would lose (1.50) from holding Liberty Resources Acquisition or give up 23.08% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	23.28%
Values	Daily Returns

Kaiser Aluminum  vs.  Liberty Resources Acquisition

Kaiser Aluminum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kaiser Aluminum has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, Kaiser Aluminum is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Liberty Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Liberty Resources Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Liberty Resources is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Kaiser Aluminum and Liberty Resources

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

The idea behind Kaiser Aluminum and Liberty Resources Acquisition 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.