Correlation Between Liberty All and Bridge Builder

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

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

Diversification Opportunities for Liberty All and Bridge Builder

-0.47

Correlation Coefficient

Liberty All  Bridge Builder

Very good diversification

The 3 months correlation between Liberty and Bridge is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Liberty All Star and Bridge Builder E in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bridge Builder E and Liberty All 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 Liberty All Star are associated (or correlated) with Bridge Builder. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bridge Builder E has no effect on the direction of Liberty All i.e., Liberty All and Bridge Builder go up and down completely randomly.

Pair Corralation between Liberty All and Bridge Builder

Considering the 90-day investment horizon Liberty All Star is expected to under-perform the Bridge Builder. In addition to that, Liberty All is 3.12 times more volatile than Bridge Builder E. It trades about -0.07 of its total potential returns per unit of risk. Bridge Builder E is currently generating about 0.13 per unit of volatility. If you would invest  857.00  in Bridge Builder E on December 28, 2024 and sell it today you would earn a total of  20.00  from holding Bridge Builder E or generate 2.33% return on investment over 90 days.

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

Liberty All Star  vs.  Bridge Builder E

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 somewhat strong basic indicators, Liberty All is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Bridge Builder E

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bridge Builder E are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Bridge Builder is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Liberty All and Bridge Builder

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

The idea behind Liberty All Star and Bridge Builder E 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.