Correlation Between Liberty Financial and 88 Energy

Can any of the company-specific risk be diversified away by investing in both Liberty Financial and 88 Energy 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 Financial and 88 Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Liberty Financial Group and 88 Energy, you can compare the effects of market volatilities on Liberty Financial and 88 Energy 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 Financial with a short position of 88 Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Liberty Financial and 88 Energy.

Diversification Opportunities for Liberty Financial and 88 Energy

0.42

Correlation Coefficient

Liberty Financial  88 Energy

Very weak diversification

The 3 months correlation between Liberty and 88E is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Liberty Financial Group and 88 Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 88 Energy and Liberty Financial 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 Financial Group are associated (or correlated) with 88 Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 88 Energy has no effect on the direction of Liberty Financial i.e., Liberty Financial and 88 Energy go up and down completely randomly.

Pair Corralation between Liberty Financial and 88 Energy

Assuming the 90 days trading horizon Liberty Financial Group is expected to under-perform the 88 Energy. But the stock apears to be less risky and, when comparing its historical volatility, Liberty Financial Group is 32.67 times less risky than 88 Energy. The stock trades about -0.08 of its potential returns per unit of risk. The 88 Energy is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  0.20  in 88 Energy on September 24, 2024 and sell it today you would earn a total of  0.00  from holding 88 Energy or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Liberty Financial Group  vs.  88 Energy

Liberty Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Liberty Financial Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Liberty Financial is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

88 Energy

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in 88 Energy are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, 88 Energy unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Liberty Financial and 88 Energy

The main advantage of trading using opposite Liberty Financial and 88 Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Liberty Financial position performs unexpectedly, 88 Energy 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 88 Energy will offset losses from the drop in 88 Energy's long position.

The idea behind Liberty Financial Group and 88 Energy 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.