Correlation Between Liberty Gold and Hannan Metals

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

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

Diversification Opportunities for Liberty Gold and Hannan Metals

-0.47

Correlation Coefficient

Liberty Gold  Hannan Metals

Very good diversification

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

Pair Corralation between Liberty Gold and Hannan Metals

Assuming the 90 days trading horizon Liberty Gold Corp is expected to under-perform the Hannan Metals. But the stock apears to be less risky and, when comparing its historical volatility, Liberty Gold Corp is 2.58 times less risky than Hannan Metals. The stock trades about -0.31 of its potential returns per unit of risk. The Hannan Metals is currently generating about 0.23 of returns per unit of risk over similar time horizon. 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

Liberty Gold Corp  vs.  Hannan Metals

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.

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.

Pair Trading with Liberty Gold and Hannan Metals

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

The idea behind Liberty Gold Corp and Hannan Metals 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.