Correlation Between Kernel Group and Liberty Resources

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

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

Diversification Opportunities for Kernel Group and Liberty Resources

-0.56

Correlation Coefficient

Kernel Group  Liberty Resources

Excellent diversification

The 3 months correlation between Kernel and Liberty is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Kernel Group Holdings and Liberty Resources Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Resources and Kernel Group 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 Kernel Group Holdings 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 Kernel Group i.e., Kernel Group and Liberty Resources go up and down completely randomly.

Pair Corralation between Kernel Group and Liberty Resources

Assuming the 90 days horizon Kernel Group Holdings is expected to generate 4.57 times more return on investment than Liberty Resources. However, Kernel Group is 4.57 times more volatile than Liberty Resources Acquisition. It trades about 0.06 of its potential returns per unit of risk. Liberty Resources Acquisition is currently generating about 0.06 per unit of risk. If you would invest  7.50  in Kernel Group Holdings on October 12, 2024 and sell it today you would lose (7.50) from holding Kernel Group Holdings or give up 100.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	49.8%
Values	Daily Returns

Kernel Group Holdings  vs.  Liberty Resources Acquisition

Kernel Group Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

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

The main advantage of trading using opposite Kernel Group and Liberty Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kernel Group 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 Kernel Group Holdings 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.