Correlation Between Liberty and Rocky Brands

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

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

Diversification Opportunities for Liberty and Rocky Brands

-0.16

Correlation Coefficient

Liberty  Rocky Brands

Good diversification

The 3 months correlation between Liberty and Rocky is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Liberty Interactive LLC and Rocky Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rocky Brands and Liberty 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 Interactive LLC are associated (or correlated) with Rocky Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rocky Brands has no effect on the direction of Liberty i.e., Liberty and Rocky Brands go up and down completely randomly.

Pair Corralation between Liberty and Rocky Brands

Assuming the 90 days trading horizon Liberty Interactive LLC is expected to generate 1.95 times more return on investment than Rocky Brands. However, Liberty is 1.95 times more volatile than Rocky Brands. It trades about 0.19 of its potential returns per unit of risk. Rocky Brands is currently generating about 0.05 per unit of risk. If you would invest  5,418  in Liberty Interactive LLC on June 29, 2024 and sell it today you would earn a total of  1,109  from holding Liberty Interactive LLC or generate 20.47% return on investment over 90 days.

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

Liberty Interactive LLC  vs.  Rocky Brands

Liberty Interactive LLC

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Interactive LLC are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Liberty sustained solid returns over the last few months and may actually be approaching a breakup point.

Rocky Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rocky Brands has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward-looking signals, Rocky Brands is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Liberty and Rocky Brands

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

The idea behind Liberty Interactive LLC and Rocky Brands 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.