Correlation Between Liberty All and Emerald Growth

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

Diversification Opportunities for Liberty All and Emerald Growth

0.97

Correlation Coefficient

Liberty All  Emerald Growth

Almost no diversification

The 3 months correlation between Liberty and Emerald is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Liberty All Star and Emerald Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerald Growth 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 Emerald Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerald Growth has no effect on the direction of Liberty All i.e., Liberty All and Emerald Growth go up and down completely randomly.

Pair Corralation between Liberty All and Emerald Growth

Considering the 90-day investment horizon Liberty All is expected to generate 1.27 times less return on investment than Emerald Growth. But when comparing it to its historical volatility, Liberty All Star is 1.39 times less risky than Emerald Growth. It trades about 0.18 of its potential returns per unit of risk. Emerald Growth Fund is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  2,327  in Emerald Growth Fund on August 31, 2024 and sell it today you would earn a total of  336.00  from holding Emerald Growth Fund or generate 14.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

Liberty All Star  vs.  Emerald Growth Fund

Liberty All Star

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty All Star are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. Despite nearly unfluctuating basic indicators, Liberty All may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Emerald Growth

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Emerald Growth Fund are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Emerald Growth showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Liberty All and Emerald Growth

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

The idea behind Liberty All Star and Emerald Growth Fund 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.

Check out your portfolio center.

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 Bonds Directory module to find actively traded corporate debentures issued by US companies.