Correlation Between Liberty Energy and Tullow Oil

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

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

Diversification Opportunities for Liberty Energy and Tullow Oil

0.16

Correlation Coefficient

Liberty Energy  Tullow Oil

Average diversification

The 3 months correlation between Liberty and Tullow is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Liberty Energy Corp and Tullow Oil PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tullow Oil PLC and Liberty Energy 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 Liberty Energy Corp are associated (or correlated) with Tullow Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tullow Oil PLC has no effect on the direction of Liberty Energy i.e., Liberty Energy and Tullow Oil go up and down completely randomly.

Pair Corralation between Liberty Energy and Tullow Oil

Given the investment horizon of 90 days Liberty Energy Corp is expected to generate 7.69 times more return on investment than Tullow Oil. However, Liberty Energy is 7.69 times more volatile than Tullow Oil PLC. It trades about 0.04 of its potential returns per unit of risk. Tullow Oil PLC is currently generating about 0.01 per unit of risk. If you would invest  0.01  in Liberty Energy Corp on October 2, 2024 and sell it today you would earn a total of  0.00  from holding Liberty Energy Corp or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.6%
Values	Daily Returns

Liberty Energy Corp  vs.  Tullow Oil PLC

Liberty Energy Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Energy Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Liberty Energy exhibited solid returns over the last few months and may actually be approaching a breakup point.

Tullow Oil PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tullow Oil PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Tullow Oil is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Liberty Energy and Tullow Oil

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

The idea behind Liberty Energy Corp and Tullow Oil PLC 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.

Check out your portfolio center.

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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.