Correlation Between Liberty Flour and STI Education

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

Diversification Opportunities for Liberty Flour and STI Education

0.29

Correlation Coefficient

Liberty Flour  STI Education

Modest diversification

The 3 months correlation between Liberty and STI is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Liberty Flour Mills and STI Education Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STI Education Systems 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 STI Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STI Education Systems has no effect on the direction of Liberty Flour i.e., Liberty Flour and STI Education go up and down completely randomly.

Pair Corralation between Liberty Flour and STI Education

Assuming the 90 days trading horizon Liberty Flour Mills is expected to generate 3.45 times more return on investment than STI Education. However, Liberty Flour is 3.45 times more volatile than STI Education Systems. It trades about 0.05 of its potential returns per unit of risk. STI Education Systems is currently generating about 0.14 per unit of risk. If you would invest  1,577  in Liberty Flour Mills on October 5, 2024 and sell it today you would earn a total of  245.00  from holding Liberty Flour Mills or generate 15.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	40.79%
Values	Daily Returns

Liberty Flour Mills  vs.  STI Education Systems

Liberty Flour Mills

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Flour Mills are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Liberty Flour exhibited solid returns over the last few months and may actually be approaching a breakup point.

STI Education Systems

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days STI Education Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather unsteady technical and fundamental indicators, STI Education may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Liberty Flour and STI Education

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

The idea behind Liberty Flour Mills and STI Education Systems 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.