Correlation Between Microequities Asset and Liberty Financial

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

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

Diversification Opportunities for Microequities Asset and Liberty Financial

0.67

Correlation Coefficient

Microequities Asset  Liberty Financial

Poor diversification

The 3 months correlation between Microequities and Liberty is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Microequities Asset Management and Liberty Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Financial and Microequities Asset 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 Microequities Asset Management are associated (or correlated) with Liberty Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liberty Financial has no effect on the direction of Microequities Asset i.e., Microequities Asset and Liberty Financial go up and down completely randomly.

Pair Corralation between Microequities Asset and Liberty Financial

Assuming the 90 days trading horizon Microequities Asset is expected to generate 8.13 times less return on investment than Liberty Financial. In addition to that, Microequities Asset is 1.24 times more volatile than Liberty Financial Group. It trades about 0.01 of its total potential returns per unit of risk. Liberty Financial Group is currently generating about 0.12 per unit of volatility. If you would invest  320.00  in Liberty Financial Group on December 24, 2024 and sell it today you would earn a total of  48.00  from holding Liberty Financial Group or generate 15.0% return on investment over 90 days.

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

Microequities Asset Management  vs.  Liberty Financial Group

Microequities Asset

Risk-Adjusted Performance

Very Weak

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

Liberty Financial

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Financial Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Liberty Financial unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microequities Asset and Liberty Financial

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

The idea behind Microequities Asset Management and Liberty Financial Group 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.