Correlation Between Liberty Media and Eagle Eye

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

Diversification Opportunities for Liberty Media and Eagle Eye

0.06

Correlation Coefficient

Liberty Media  Eagle Eye

Significant diversification

The 3 months correlation between Liberty and Eagle is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Liberty Media Corp and Eagle Eye Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eagle Eye Solutions 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 Eagle Eye. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eagle Eye Solutions has no effect on the direction of Liberty Media i.e., Liberty Media and Eagle Eye go up and down completely randomly.

Pair Corralation between Liberty Media and Eagle Eye

Assuming the 90 days trading horizon Liberty Media Corp is expected to generate 1.82 times more return on investment than Eagle Eye. However, Liberty Media is 1.82 times more volatile than Eagle Eye Solutions. It trades about 0.31 of its potential returns per unit of risk. Eagle Eye Solutions is currently generating about 0.12 per unit of risk. If you would invest  7,522  in Liberty Media Corp on September 16, 2024 and sell it today you would earn a total of  1,041  from holding Liberty Media Corp or generate 13.84% return on investment over 90 days.

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

Liberty Media Corp  vs.  Eagle Eye Solutions

Liberty Media Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Media Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Liberty Media unveiled solid returns over the last few months and may actually be approaching a breakup point.

Eagle Eye Solutions

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Eagle Eye Solutions are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Eagle Eye is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Liberty Media and Eagle Eye

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

The idea behind Liberty Media Corp and Eagle Eye Solutions 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.