Correlation Between Liberty Broadband and Spirent Communications

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

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

Diversification Opportunities for Liberty Broadband and Spirent Communications

-0.18

Correlation Coefficient

Liberty Broadband  Spirent Communications

Good diversification

The 3 months correlation between Liberty and Spirent is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Liberty Broadband and Spirent Communications plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spirent Communications and Liberty Broadband 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 Broadband are associated (or correlated) with Spirent Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spirent Communications has no effect on the direction of Liberty Broadband i.e., Liberty Broadband and Spirent Communications go up and down completely randomly.

Pair Corralation between Liberty Broadband and Spirent Communications

Assuming the 90 days horizon Liberty Broadband is expected to under-perform the Spirent Communications. But the stock apears to be less risky and, when comparing its historical volatility, Liberty Broadband is 1.25 times less risky than Spirent Communications. The stock trades about -0.15 of its potential returns per unit of risk. The Spirent Communications plc is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  216.00  in Spirent Communications plc on October 10, 2024 and sell it today you would earn a total of  0.00  from holding Spirent Communications plc or generate 0.0% return on investment over 90 days.

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

Liberty Broadband  vs.  Spirent Communications plc

Liberty Broadband

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Broadband are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Liberty Broadband is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Spirent Communications

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Spirent Communications plc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Spirent Communications is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Liberty Broadband and Spirent Communications

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

The idea behind Liberty Broadband and Spirent Communications plc 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.