Correlation Between IShares Fundamental and Liberty Defense

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

By analyzing existing cross correlation between iShares Fundamental Hedged and Liberty Defense Holdings, you can compare the effects of market volatilities on IShares Fundamental and Liberty Defense 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 IShares Fundamental with a short position of Liberty Defense. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Fundamental and Liberty Defense.

Diversification Opportunities for IShares Fundamental and Liberty Defense

-0.79

Correlation Coefficient

IShares Fundamental  Liberty Defense

Pay attention - limited upside

The 3 months correlation between IShares and Liberty is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding iShares Fundamental Hedged and Liberty Defense Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Defense Holdings and IShares Fundamental 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 iShares Fundamental Hedged are associated (or correlated) with Liberty Defense. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liberty Defense Holdings has no effect on the direction of IShares Fundamental i.e., IShares Fundamental and Liberty Defense go up and down completely randomly.

Pair Corralation between IShares Fundamental and Liberty Defense

Assuming the 90 days trading horizon iShares Fundamental Hedged is expected to generate 0.11 times more return on investment than Liberty Defense. However, iShares Fundamental Hedged is 9.06 times less risky than Liberty Defense. It trades about 0.07 of its potential returns per unit of risk. Liberty Defense Holdings is currently generating about 0.0 per unit of risk. If you would invest  4,365  in iShares Fundamental Hedged on September 27, 2024 and sell it today you would earn a total of  1,079  from holding iShares Fundamental Hedged or generate 24.72% return on investment over 90 days.

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

iShares Fundamental Hedged  vs.  Liberty Defense Holdings

iShares Fundamental

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Fundamental Hedged has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, IShares Fundamental is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Liberty Defense Holdings

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Defense Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal technical and fundamental indicators, Liberty Defense may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with IShares Fundamental and Liberty Defense

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

The idea behind iShares Fundamental Hedged and Liberty Defense Holdings 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.