Correlation Between Tri Continental and Liberty All

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

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

Diversification Opportunities for Tri Continental and Liberty All

0.96

Correlation Coefficient

Tri Continental  Liberty All

Almost no diversification

The 3 months correlation between Tri and Liberty is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Tri Continental Closed 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 Tri Continental 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 Tri Continental Closed 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 Tri Continental i.e., Tri Continental and Liberty All go up and down completely randomly.

Pair Corralation between Tri Continental and Liberty All

Allowing for the 90-day total investment horizon Tri Continental is expected to generate 1.33 times less return on investment than Liberty All. But when comparing it to its historical volatility, Tri Continental Closed is 1.25 times less risky than Liberty All. It trades about 0.21 of its potential returns per unit of risk. Liberty All Star is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  697.00  in Liberty All Star on August 31, 2024 and sell it today you would earn a total of  31.00  from holding Liberty All Star or generate 4.45% return on investment over 90 days.

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

Tri Continental Closed  vs.  Liberty All Star

Tri Continental Closed

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tri Continental Closed are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Tri Continental may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Liberty All Star

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty All Star are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat weak basic indicators, Liberty All may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Tri Continental and Liberty All

The main advantage of trading using opposite Tri Continental and Liberty All positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tri Continental 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 Tri Continental Closed 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.