Correlation Between Liberty Global and Barrick Gold

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

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

Diversification Opportunities for Liberty Global and Barrick Gold

-0.38

Correlation Coefficient

Liberty Global  Barrick Gold

Very good diversification

The 3 months correlation between Liberty and Barrick is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Liberty Global PLC and Barrick Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barrick Gold Corp and Liberty Global 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 Global PLC are associated (or correlated) with Barrick Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barrick Gold Corp has no effect on the direction of Liberty Global i.e., Liberty Global and Barrick Gold go up and down completely randomly.

Pair Corralation between Liberty Global and Barrick Gold

Assuming the 90 days horizon Liberty Global PLC is expected to generate 1.7 times more return on investment than Barrick Gold. However, Liberty Global is 1.7 times more volatile than Barrick Gold Corp. It trades about 0.2 of its potential returns per unit of risk. Barrick Gold Corp is currently generating about -0.57 per unit of risk. If you would invest  1,078  in Liberty Global PLC on August 19, 2024 and sell it today you would earn a total of  144.00  from holding Liberty Global PLC or generate 13.36% return on investment over 90 days.

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

Liberty Global PLC  vs.  Barrick Gold Corp

Liberty Global PLC

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Global PLC are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Liberty Global sustained solid returns over the last few months and may actually be approaching a breakup point.

Barrick Gold Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Barrick Gold Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's essential indicators remain rather sound which may send shares a bit higher in December 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Liberty Global and Barrick Gold

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

The idea behind Liberty Global PLC and Barrick Gold 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.

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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.