Correlation Between Gulf Coast and Liberty Energy

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

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

Diversification Opportunities for Gulf Coast and Liberty Energy

-0.1

Correlation Coefficient

Gulf Coast  Liberty Energy

Good diversification

The 3 months correlation between Gulf and Liberty is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Gulf Coast and Liberty Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Energy Corp and Gulf Coast 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 Gulf Coast are associated (or correlated) with Liberty Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liberty Energy Corp has no effect on the direction of Gulf Coast i.e., Gulf Coast and Liberty Energy go up and down completely randomly.

Pair Corralation between Gulf Coast and Liberty Energy

If you would invest  1.30  in Gulf Coast on September 30, 2024 and sell it today you would earn a total of  1.70  from holding Gulf Coast or generate 130.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.67%
Values	Daily Returns

Gulf Coast  vs.  Liberty Energy Corp

Gulf Coast

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gulf Coast are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Gulf Coast unveiled solid returns over the last few months and may actually be approaching a breakup point.

Liberty Energy Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Energy Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting basic indicators, Liberty Energy exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gulf Coast and Liberty Energy

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

The idea behind Gulf Coast and Liberty Energy Corp 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.