Correlation Between Liberty Defense and IShares Fundamental

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

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

Diversification Opportunities for Liberty Defense and IShares Fundamental

-0.81

Correlation Coefficient

Liberty Defense  IShares Fundamental

Pay attention - limited upside

The 3 months correlation between Liberty and IShares is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Liberty Defense Holdings and iShares Fundamental Hedged in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Fundamental and Liberty Defense 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 Defense Holdings are associated (or correlated) with IShares Fundamental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Fundamental has no effect on the direction of Liberty Defense i.e., Liberty Defense and IShares Fundamental go up and down completely randomly.

Pair Corralation between Liberty Defense and IShares Fundamental

Assuming the 90 days horizon Liberty Defense Holdings is expected to generate 18.48 times more return on investment than IShares Fundamental. However, Liberty Defense is 18.48 times more volatile than iShares Fundamental Hedged. It trades about 0.23 of its potential returns per unit of risk. iShares Fundamental Hedged is currently generating about -0.3 per unit of risk. If you would invest  38.00  in Liberty Defense Holdings on September 25, 2024 and sell it today you would earn a total of  22.00  from holding Liberty Defense Holdings or generate 57.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Liberty Defense Holdings  vs.  iShares Fundamental Hedged

Liberty Defense Holdings

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Defense Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal technical and fundamental indicators, Liberty Defense reported solid returns over the last few months and may actually be approaching a breakup point.

iShares Fundamental

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Fundamental Hedged are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, IShares Fundamental is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Liberty Defense and IShares Fundamental

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

The idea behind Liberty Defense Holdings and iShares Fundamental Hedged 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.