Correlation Between Gap, and Liberty Resources

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

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

Diversification Opportunities for Gap, and Liberty Resources

-0.56

Correlation Coefficient

Gap,  Liberty Resources

Excellent diversification

The 3 months correlation between Gap, and Liberty is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding The Gap, and Liberty Resources Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Resources and Gap, 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 The Gap, are associated (or correlated) with Liberty Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liberty Resources has no effect on the direction of Gap, i.e., Gap, and Liberty Resources go up and down completely randomly.

Pair Corralation between Gap, and Liberty Resources

Considering the 90-day investment horizon Gap, is expected to generate 2.29 times less return on investment than Liberty Resources. But when comparing it to its historical volatility, The Gap, is 4.1 times less risky than Liberty Resources. It trades about 0.06 of its potential returns per unit of risk. Liberty Resources Acquisition is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  10.00  in Liberty Resources Acquisition on September 15, 2024 and sell it today you would lose (5.00) from holding Liberty Resources Acquisition or give up 50.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	28.69%
Values	Daily Returns

The Gap,  vs.  Liberty Resources Acquisition

Gap,

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Gap, are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Gap, reported solid returns over the last few months and may actually be approaching a breakup point.

Liberty Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Liberty Resources Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Liberty Resources is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Gap, and Liberty Resources

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

The idea behind The Gap, and Liberty Resources Acquisition 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.