Correlation Between Hannan Metals and Liberty Gold

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

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

Diversification Opportunities for Hannan Metals and Liberty Gold

-0.47

Correlation Coefficient

Hannan Metals  Liberty Gold

Very good diversification

The 3 months correlation between Hannan and Liberty is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Hannan Metals and Liberty Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Gold Corp and Hannan Metals 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 Hannan Metals are associated (or correlated) with Liberty Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liberty Gold Corp has no effect on the direction of Hannan Metals i.e., Hannan Metals and Liberty Gold go up and down completely randomly.

Pair Corralation between Hannan Metals and Liberty Gold

Assuming the 90 days horizon Hannan Metals is expected to generate 2.58 times more return on investment than Liberty Gold. However, Hannan Metals is 2.58 times more volatile than Liberty Gold Corp. It trades about 0.23 of its potential returns per unit of risk. Liberty Gold Corp is currently generating about -0.31 per unit of risk. If you would invest  49.00  in Hannan Metals on September 23, 2024 and sell it today you would earn a total of  19.00  from holding Hannan Metals or generate 38.78% return on investment over 90 days.

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

Hannan Metals  vs.  Liberty Gold Corp

Hannan Metals

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hannan Metals are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Hannan Metals showed solid returns over the last few months and may actually be approaching a breakup point.

Liberty Gold Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Liberty Gold Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Hannan Metals and Liberty Gold

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

The idea behind Hannan Metals and Liberty Gold 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.