Correlation Between Lakeshore Acquisition and Liberty Resources

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

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

Diversification Opportunities for Lakeshore Acquisition and Liberty Resources

0.08

Correlation Coefficient

Lakeshore Acquisition  Liberty Resources

Significant diversification

The 3 months correlation between Lakeshore and Liberty is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Lakeshore Acquisition II and Liberty Resources Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Resources and Lakeshore Acquisition 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 Lakeshore Acquisition II 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 Lakeshore Acquisition i.e., Lakeshore Acquisition and Liberty Resources go up and down completely randomly.

Pair Corralation between Lakeshore Acquisition and Liberty Resources

Assuming the 90 days horizon Lakeshore Acquisition II is expected to generate 1.99 times more return on investment than Liberty Resources. However, Lakeshore Acquisition is 1.99 times more volatile than Liberty Resources Acquisition. It trades about 0.08 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  3.99  in Lakeshore Acquisition II on October 12, 2024 and sell it today you would lose (2.00) from holding Lakeshore Acquisition II or give up 50.13% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	44.0%
Values	Daily Returns

Lakeshore Acquisition II  vs.  Liberty Resources Acquisition

Lakeshore Acquisition

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lakeshore Acquisition II has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable fundamental drivers, Lakeshore Acquisition is not utilizing all of its potentials. The current 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 Lakeshore Acquisition and Liberty Resources

The main advantage of trading using opposite Lakeshore Acquisition and Liberty Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lakeshore Acquisition 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 Lakeshore Acquisition II 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.