Correlation Between Rio2 and Liberty Gold

Can any of the company-specific risk be diversified away by investing in both Rio2 and Liberty Gold 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 Rio2 and Liberty Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Rio2 and Liberty Gold Corp, you can compare the effects of market volatilities on Rio2 and Liberty Gold 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 Rio2 with a short position of Liberty Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rio2 and Liberty Gold.

Diversification Opportunities for Rio2 and Liberty Gold

0.88

Correlation Coefficient

Rio2  Liberty Gold

Very poor diversification

The 3 months correlation between Rio2 and Liberty is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Rio2 and Liberty Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Gold Corp and Rio2 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 Rio2 are associated (or correlated) with Liberty Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liberty Gold Corp has no effect on the direction of Rio2 i.e., Rio2 and Liberty Gold go up and down completely randomly.

Pair Corralation between Rio2 and Liberty Gold

Assuming the 90 days horizon Rio2 is expected to generate 0.84 times more return on investment than Liberty Gold. However, Rio2 is 1.19 times less risky than Liberty Gold. It trades about 0.09 of its potential returns per unit of risk. Liberty Gold Corp is currently generating about 0.03 per unit of risk. If you would invest  34.00  in Rio2 on October 24, 2024 and sell it today you would earn a total of  31.00  from holding Rio2 or generate 91.18% return on investment over 90 days.

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

Rio2  vs.  Liberty Gold Corp

Rio2

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rio2 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Liberty Gold Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Liberty Gold Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Rio2 and Liberty Gold

The main advantage of trading using opposite Rio2 and Liberty Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rio2 position performs unexpectedly, Liberty Gold 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 Gold will offset losses from the drop in Liberty Gold's long position.

The idea behind Rio2 and Liberty Gold Corp 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.