Correlation Between LFM Properties and Liberty Flour

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

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

Diversification Opportunities for LFM Properties and Liberty Flour

-0.44

Correlation Coefficient

LFM Properties  Liberty Flour

Very good diversification

The 3 months correlation between LFM and Liberty is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding LFM Properties Corp and Liberty Flour Mills in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Flour Mills and LFM Properties 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 LFM Properties Corp are associated (or correlated) with Liberty Flour. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liberty Flour Mills has no effect on the direction of LFM Properties i.e., LFM Properties and Liberty Flour go up and down completely randomly.

Pair Corralation between LFM Properties and Liberty Flour

Assuming the 90 days trading horizon LFM Properties Corp is expected to generate 1.36 times more return on investment than Liberty Flour. However, LFM Properties is 1.36 times more volatile than Liberty Flour Mills. It trades about 0.04 of its potential returns per unit of risk. Liberty Flour Mills is currently generating about 0.06 per unit of risk. If you would invest  5.10  in LFM Properties Corp on October 5, 2024 and sell it today you would lose (0.60) from holding LFM Properties Corp or give up 11.76% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	90.28%
Values	Daily Returns

LFM Properties Corp  vs.  Liberty Flour Mills

LFM Properties Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LFM Properties Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

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.

Pair Trading with LFM Properties and Liberty Flour

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

The idea behind LFM Properties Corp and Liberty Flour Mills 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.