Correlation Between Liberty Energy and True North

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

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

Diversification Opportunities for Liberty Energy and True North

0.0

Correlation Coefficient

Liberty Energy  True North

Pay attention - limited upside

The 3 months correlation between Liberty and True is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Liberty Energy Corp and True North Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on True North Energy and Liberty Energy 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 Energy Corp are associated (or correlated) with True North. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of True North Energy has no effect on the direction of Liberty Energy i.e., Liberty Energy and True North go up and down completely randomly.

Pair Corralation between Liberty Energy and True North

Given the investment horizon of 90 days Liberty Energy Corp is expected to generate 12.95 times more return on investment than True North. However, Liberty Energy is 12.95 times more volatile than True North Energy. It trades about 0.04 of its potential returns per unit of risk. True North Energy is currently generating about -0.05 per unit of risk. If you would invest  0.01  in Liberty Energy Corp on September 23, 2024 and sell it today you would earn a total of  0.00  from holding Liberty Energy Corp or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Liberty Energy Corp  vs.  True North Energy

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.

True North Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days True North Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, True North is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Liberty Energy and True North

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

The idea behind Liberty Energy Corp and True North Energy 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .