Correlation Between Standard Life and Liberty All

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

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

Diversification Opportunities for Standard Life and Liberty All

-0.82

Correlation Coefficient

Standard Life  Liberty All

Pay attention - limited upside

The 3 months correlation between Standard and Liberty is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Standard Life Aberdeen and Liberty All Star in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty All Star and Standard Life 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 Standard Life Aberdeen are associated (or correlated) with Liberty All. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liberty All Star has no effect on the direction of Standard Life i.e., Standard Life and Liberty All go up and down completely randomly.

Pair Corralation between Standard Life and Liberty All

Assuming the 90 days horizon Standard Life Aberdeen is expected to generate 2.26 times more return on investment than Liberty All. However, Standard Life is 2.26 times more volatile than Liberty All Star. It trades about 0.16 of its potential returns per unit of risk. Liberty All Star is currently generating about -0.16 per unit of risk. If you would invest  706.00  in Standard Life Aberdeen on December 21, 2024 and sell it today you would earn a total of  199.00  from holding Standard Life Aberdeen or generate 28.19% return on investment over 90 days.

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

Standard Life Aberdeen  vs.  Liberty All Star

Standard Life Aberdeen

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Standard Life Aberdeen are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Standard Life showed solid returns over the last few months and may actually be approaching a breakup point.

Liberty All Star

Risk-Adjusted Performance

Very Weak

Over the last 90 days Liberty All Star has generated negative risk-adjusted returns adding no value to fund investors. Despite unfluctuating performance in the last few months, the Fund's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the mutual fund stockholders.

Pair Trading with Standard Life and Liberty All

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

The idea behind Standard Life Aberdeen and Liberty All Star 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.