Correlation Between STI Education and Liberty Flour

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

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

Diversification Opportunities for STI Education and Liberty Flour

0.51

Correlation Coefficient

STI Education  Liberty Flour

Very weak diversification

The 3 months correlation between STI and Liberty is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding STI Education Systems 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 STI Education 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 STI Education Systems 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 STI Education i.e., STI Education and Liberty Flour go up and down completely randomly.

Pair Corralation between STI Education and Liberty Flour

Assuming the 90 days trading horizon STI Education Systems is expected to generate 0.29 times more return on investment than Liberty Flour. However, STI Education Systems is 3.5 times less risky than Liberty Flour. It trades about 0.1 of its potential returns per unit of risk. Liberty Flour Mills is currently generating about 0.01 per unit of risk. If you would invest  126.00  in STI Education Systems on December 21, 2024 and sell it today you would earn a total of  14.00  from holding STI Education Systems or generate 11.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	86.21%
Values	Daily Returns

STI Education Systems  vs.  Liberty Flour Mills

STI Education Systems

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in STI Education Systems are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, STI Education exhibited solid returns over the last few months and may actually be approaching a breakup point.

Liberty Flour Mills

Risk-Adjusted Performance

Very Weak

Over the last 90 days Liberty Flour Mills has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Liberty Flour is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with STI Education and Liberty Flour

The main advantage of trading using opposite STI Education and Liberty Flour positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STI Education 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 STI Education Systems 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.