Correlation Between Liberty Broadband and Clean Energy

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

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

Diversification Opportunities for Liberty Broadband and Clean Energy

0.3

Correlation Coefficient

Liberty Broadband  Clean Energy

Weak diversification

The 3 months correlation between Liberty and Clean is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Liberty Broadband and Clean Energy Fuels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clean Energy Fuels 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 Clean Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clean Energy Fuels has no effect on the direction of Liberty Broadband i.e., Liberty Broadband and Clean Energy go up and down completely randomly.

Pair Corralation between Liberty Broadband and Clean Energy

Assuming the 90 days horizon Liberty Broadband is expected to generate 0.67 times more return on investment than Clean Energy. However, Liberty Broadband is 1.5 times less risky than Clean Energy. It trades about 0.0 of its potential returns per unit of risk. Clean Energy Fuels is currently generating about -0.01 per unit of risk. If you would invest  8,200  in Liberty Broadband on October 11, 2024 and sell it today you would lose (950.00) from holding Liberty Broadband or give up 11.59% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Liberty Broadband  vs.  Clean Energy Fuels

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.

Clean Energy Fuels

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Clean Energy Fuels are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Clean Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Liberty Broadband and Clean Energy

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

The idea behind Liberty Broadband and Clean Energy Fuels 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.