Correlation Between Liberty Defense and IShares SPTSX

Can any of the company-specific risk be diversified away by investing in both Liberty Defense and IShares SPTSX 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 SPTSX 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 SPTSX Capped, you can compare the effects of market volatilities on Liberty Defense and IShares SPTSX 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 SPTSX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Liberty Defense and IShares SPTSX.

Diversification Opportunities for Liberty Defense and IShares SPTSX

-0.3

Correlation Coefficient

Liberty Defense  IShares SPTSX

Very good diversification

The 3 months correlation between Liberty and IShares is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Liberty Defense Holdings and iShares SPTSX Capped in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares SPTSX Capped 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 SPTSX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares SPTSX Capped has no effect on the direction of Liberty Defense i.e., Liberty Defense and IShares SPTSX go up and down completely randomly.

Pair Corralation between Liberty Defense and IShares SPTSX

Assuming the 90 days horizon Liberty Defense Holdings is expected to generate 10.74 times more return on investment than IShares SPTSX. However, Liberty Defense is 10.74 times more volatile than iShares SPTSX Capped. It trades about 0.23 of its potential returns per unit of risk. iShares SPTSX Capped is currently generating about -0.29 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	Insignificant
Accuracy	90.91%
Values	Daily Returns

Liberty Defense Holdings  vs.  iShares SPTSX Capped

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 SPTSX Capped

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares SPTSX Capped has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, IShares SPTSX 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 SPTSX

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

The idea behind Liberty Defense Holdings and iShares SPTSX Capped 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.