Correlation Between Liberty Media and Amazon
Can any of the company-specific risk be diversified away by investing in both Liberty Media and Amazon 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 Media and Amazon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Liberty Media Corp and Amazon Inc, you can compare the effects of market volatilities on Liberty Media and Amazon 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 Media with a short position of Amazon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Liberty Media and Amazon.
Diversification Opportunities for Liberty Media and Amazon
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Liberty and Amazon is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Liberty Media Corp and Amazon Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazon Inc and Liberty Media 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 Media Corp are associated (or correlated) with Amazon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amazon Inc has no effect on the direction of Liberty Media i.e., Liberty Media and Amazon go up and down completely randomly.
Pair Corralation between Liberty Media and Amazon
Assuming the 90 days trading horizon Liberty Media is expected to generate 1.54 times less return on investment than Amazon. But when comparing it to its historical volatility, Liberty Media Corp is 2.89 times less risky than Amazon. It trades about 0.17 of its potential returns per unit of risk. Amazon Inc is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 18,650 in Amazon Inc on October 31, 2024 and sell it today you would earn a total of 3,800 from holding Amazon Inc or generate 20.38% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Liberty Media Corp vs. Amazon Inc
Performance |
Timeline |
Liberty Media Corp |
Amazon Inc |
Liberty Media and Amazon Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Liberty Media and Amazon
The main advantage of trading using opposite Liberty Media and Amazon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Liberty Media position performs unexpectedly, Amazon 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 Amazon will offset losses from the drop in Amazon's long position.Liberty Media vs. Worldwide Healthcare Trust | ||
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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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