Correlation Between Liberty Defense and Nexoptic Technology

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

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

Diversification Opportunities for Liberty Defense and Nexoptic Technology

-0.66

Correlation Coefficient

Liberty Defense  Nexoptic Technology

Excellent diversification

The 3 months correlation between Liberty and Nexoptic is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Liberty Defense Holdings and Nexoptic Technology Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nexoptic Technology Corp and Liberty Defense 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 Defense Holdings are associated (or correlated) with Nexoptic Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nexoptic Technology Corp has no effect on the direction of Liberty Defense i.e., Liberty Defense and Nexoptic Technology go up and down completely randomly.

Pair Corralation between Liberty Defense and Nexoptic Technology

Assuming the 90 days horizon Liberty Defense Holdings is expected to generate 1.12 times more return on investment than Nexoptic Technology. However, Liberty Defense is 1.12 times more volatile than Nexoptic Technology Corp. It trades about 0.23 of its potential returns per unit of risk. Nexoptic Technology Corp is currently generating about -0.02 per unit of risk. If you would invest  38.00  in Liberty Defense Holdings on September 25, 2024 and sell it today you would earn a total of  22.00  from holding Liberty Defense Holdings or generate 57.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Liberty Defense Holdings  vs.  Nexoptic Technology Corp

Liberty Defense Holdings

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Defense Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal technical and fundamental indicators, Liberty Defense reported solid returns over the last few months and may actually be approaching a breakup point.

Nexoptic Technology Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nexoptic Technology Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Nexoptic Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Liberty Defense and Nexoptic Technology

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

The idea behind Liberty Defense Holdings and Nexoptic Technology 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.