Correlation Between Liberty Gold and Predictive Discovery

Can any of the company-specific risk be diversified away by investing in both Liberty Gold and Predictive Discovery 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 Predictive Discovery 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 Predictive Discovery Limited, you can compare the effects of market volatilities on Liberty Gold and Predictive Discovery 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 Predictive Discovery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Liberty Gold and Predictive Discovery.

Diversification Opportunities for Liberty Gold and Predictive Discovery

0.39

Correlation Coefficient

Liberty Gold  Predictive Discovery

Weak diversification

The 3 months correlation between Liberty and Predictive is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Liberty Gold Corp and Predictive Discovery Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Predictive Discovery 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 Predictive Discovery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Predictive Discovery has no effect on the direction of Liberty Gold i.e., Liberty Gold and Predictive Discovery go up and down completely randomly.

Pair Corralation between Liberty Gold and Predictive Discovery

Assuming the 90 days horizon Liberty Gold is expected to generate 5.36 times less return on investment than Predictive Discovery. But when comparing it to its historical volatility, Liberty Gold Corp is 1.47 times less risky than Predictive Discovery. It trades about 0.05 of its potential returns per unit of risk. Predictive Discovery Limited is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  11.00  in Predictive Discovery Limited on June 21, 2024 and sell it today you would earn a total of  9.00  from holding Predictive Discovery Limited or generate 81.82% return on investment over 90 days.

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

Liberty Gold Corp  vs.  Predictive Discovery Limited

Liberty Gold Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Gold Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Liberty Gold reported solid returns over the last few months and may actually be approaching a breakup point.

Predictive Discovery

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Predictive Discovery Limited are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Predictive Discovery reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Liberty Gold and Predictive Discovery

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

The idea behind Liberty Gold Corp and Predictive Discovery Limited 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 Transaction History module to view history of all your transactions and understand their impact on performance.