Correlation Between Liberty All and The Midcap

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

By analyzing existing cross correlation between Liberty All Star and The Midcap Growth, you can compare the effects of market volatilities on Liberty All and The Midcap 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 All with a short position of The Midcap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Liberty All and The Midcap.

Diversification Opportunities for Liberty All and The Midcap

0.98

Correlation Coefficient

Liberty All  The Midcap

Almost no diversification

The 3 months correlation between Liberty and The is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Liberty All Star and The Midcap Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Midcap Growth and Liberty All 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 All Star are associated (or correlated) with The Midcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Midcap Growth has no effect on the direction of Liberty All i.e., Liberty All and The Midcap go up and down completely randomly.

Pair Corralation between Liberty All and The Midcap

Considering the 90-day investment horizon Liberty All is expected to generate 1.22 times less return on investment than The Midcap. In addition to that, Liberty All is 1.02 times more volatile than The Midcap Growth. It trades about 0.17 of its total potential returns per unit of risk. The Midcap Growth is currently generating about 0.22 per unit of volatility. If you would invest  4,626  in The Midcap Growth on September 2, 2024 and sell it today you would earn a total of  543.00  from holding The Midcap Growth or generate 11.74% return on investment over 90 days.

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

Liberty All Star  vs.  The Midcap Growth

Liberty All Star

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty All Star are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat weak basic indicators, Liberty All may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Midcap Growth

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in The Midcap Growth are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, The Midcap may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Liberty All and The Midcap

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

The idea behind Liberty All Star and The Midcap Growth 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 CEOs Directory module to screen CEOs from public companies around the world.