Correlation Between Yancoal Australia and Liberty Financial

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

By analyzing existing cross correlation between Yancoal Australia and Liberty Financial Group, you can compare the effects of market volatilities on Yancoal Australia and Liberty Financial 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 Yancoal Australia with a short position of Liberty Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yancoal Australia and Liberty Financial.

Diversification Opportunities for Yancoal Australia and Liberty Financial

-0.57

Correlation Coefficient

Yancoal Australia  Liberty Financial

Excellent diversification

The 3 months correlation between Yancoal and Liberty is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Yancoal Australia and Liberty Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Financial and Yancoal Australia 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 Yancoal Australia are associated (or correlated) with Liberty Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liberty Financial has no effect on the direction of Yancoal Australia i.e., Yancoal Australia and Liberty Financial go up and down completely randomly.

Pair Corralation between Yancoal Australia and Liberty Financial

Assuming the 90 days trading horizon Yancoal Australia is expected to under-perform the Liberty Financial. In addition to that, Yancoal Australia is 1.2 times more volatile than Liberty Financial Group. It trades about -0.08 of its total potential returns per unit of risk. Liberty Financial Group is currently generating about -0.08 per unit of volatility. If you would invest  331.00  in Liberty Financial Group on September 24, 2024 and sell it today you would lose (7.00) from holding Liberty Financial Group or give up 2.11% of portfolio value over 90 days.

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

Yancoal Australia  vs.  Liberty Financial Group

Yancoal Australia

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Yancoal Australia are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain essential indicators, Yancoal Australia may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Liberty Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Liberty Financial Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Liberty Financial is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Yancoal Australia and Liberty Financial

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

The idea behind Yancoal Australia and Liberty Financial Group 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.