Correlation Between Liberty Broadband and H M

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

By analyzing existing cross correlation between Liberty Broadband and H M Hennes, you can compare the effects of market volatilities on Liberty Broadband and H M 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 H M. Check out your portfolio center. Please also check ongoing floating volatility patterns of Liberty Broadband and H M.

Diversification Opportunities for Liberty Broadband and H M

0.26

Correlation Coefficient

Liberty Broadband  H M

Modest diversification

The 3 months correlation between Liberty and HMSB is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Liberty Broadband and H M Hennes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on H M Hennes 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 H M. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of H M Hennes has no effect on the direction of Liberty Broadband i.e., Liberty Broadband and H M go up and down completely randomly.

Pair Corralation between Liberty Broadband and H M

Assuming the 90 days horizon Liberty Broadband is expected to generate 0.98 times more return on investment than H M. However, Liberty Broadband is 1.02 times less risky than H M. It trades about 0.02 of its potential returns per unit of risk. H M Hennes is currently generating about -0.03 per unit of risk. If you would invest  7,350  in Liberty Broadband on December 22, 2024 and sell it today you would earn a total of  50.00  from holding Liberty Broadband or generate 0.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.0%
Values	Daily Returns

Liberty Broadband  vs.  H M Hennes

Liberty Broadband

Risk-Adjusted Performance

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.

H M Hennes

Risk-Adjusted Performance

Very Weak

Over the last 90 days H M Hennes has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, H M is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Liberty Broadband and H M

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

The idea behind Liberty Broadband and H M Hennes 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.