Correlation Between Liberty Flour and First Abacus

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

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

Diversification Opportunities for Liberty Flour and First Abacus

0.58

Correlation Coefficient

Liberty Flour  First Abacus

Very weak diversification

The 3 months correlation between Liberty and First is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Liberty Flour Mills and First Abacus Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Abacus Financial and Liberty Flour 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 Flour Mills are associated (or correlated) with First Abacus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Abacus Financial has no effect on the direction of Liberty Flour i.e., Liberty Flour and First Abacus go up and down completely randomly.

Pair Corralation between Liberty Flour and First Abacus

Assuming the 90 days trading horizon Liberty Flour Mills is expected to generate 1.45 times more return on investment than First Abacus. However, Liberty Flour is 1.45 times more volatile than First Abacus Financial. It trades about 0.06 of its potential returns per unit of risk. First Abacus Financial is currently generating about -0.02 per unit of risk. If you would invest  1,476  in Liberty Flour Mills on October 20, 2024 and sell it today you would earn a total of  122.00  from holding Liberty Flour Mills or generate 8.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	45.0%
Values	Daily Returns

Liberty Flour Mills  vs.  First Abacus Financial

Liberty Flour Mills

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Flour Mills are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, Liberty Flour exhibited solid returns over the last few months and may actually be approaching a breakup point.

First Abacus Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Abacus Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Liberty Flour and First Abacus

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

The idea behind Liberty Flour Mills and First Abacus Financial 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.