Correlation Between Red Pine and Liberty Gold

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

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

Diversification Opportunities for Red Pine and Liberty Gold

0.34

Correlation Coefficient

Red Pine  Liberty Gold

Weak diversification

The 3 months correlation between Red and Liberty is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Red Pine Exploration 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 Red Pine 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 Red Pine Exploration 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 Red Pine i.e., Red Pine and Liberty Gold go up and down completely randomly.

Pair Corralation between Red Pine and Liberty Gold

Assuming the 90 days horizon Red Pine Exploration is expected to under-perform the Liberty Gold. But the stock apears to be less risky and, when comparing its historical volatility, Red Pine Exploration is 1.66 times less risky than Liberty Gold. The stock trades about -0.11 of its potential returns per unit of risk. The Liberty Gold Corp is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  30.00  in Liberty Gold Corp on September 13, 2024 and sell it today you would lose (2.00) from holding Liberty Gold Corp or give up 6.67% of portfolio value over 90 days.

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

Red Pine Exploration  vs.  Liberty Gold Corp

Red Pine Exploration

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Red Pine Exploration are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Red Pine may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Red Pine and Liberty Gold

The main advantage of trading using opposite Red Pine and Liberty Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Red Pine 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 Red Pine Exploration 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.