Correlation Between Liberty All and Conestoga Small

Can any of the company-specific risk be diversified away by investing in both Liberty All and Conestoga Small 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 Conestoga Small 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 Conestoga Small Cap, you can compare the effects of market volatilities on Liberty All and Conestoga Small 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 Conestoga Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Liberty All and Conestoga Small.

Diversification Opportunities for Liberty All and Conestoga Small

0.69

Correlation Coefficient

Liberty All  Conestoga Small

Poor diversification

The 3 months correlation between Liberty and Conestoga is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Liberty All Star and Conestoga Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Conestoga Small Cap 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 Conestoga Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Conestoga Small Cap has no effect on the direction of Liberty All i.e., Liberty All and Conestoga Small go up and down completely randomly.

Pair Corralation between Liberty All and Conestoga Small

Considering the 90-day investment horizon Liberty All Star is expected to generate 0.79 times more return on investment than Conestoga Small. However, Liberty All Star is 1.26 times less risky than Conestoga Small. It trades about -0.07 of its potential returns per unit of risk. Conestoga Small Cap is currently generating about -0.17 per unit of risk. If you would invest  683.00  in Liberty All Star on December 29, 2024 and sell it today you would lose (29.00) from holding Liberty All Star or give up 4.25% of portfolio value over 90 days.

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

Liberty All Star  vs.  Conestoga Small Cap

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.

Conestoga Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Conestoga Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Liberty All and Conestoga Small

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

The idea behind Liberty All Star and Conestoga Small Cap 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..