Correlation Between American Nortel and Liberty Latin

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

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

Diversification Opportunities for American Nortel and Liberty Latin

0.49

Correlation Coefficient

American Nortel  Liberty Latin

Very weak diversification

The 3 months correlation between American and Liberty is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding American Nortel Communications and Liberty Latin America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Latin America and American Nortel 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 American Nortel Communications are associated (or correlated) with Liberty Latin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liberty Latin America has no effect on the direction of American Nortel i.e., American Nortel and Liberty Latin go up and down completely randomly.

Pair Corralation between American Nortel and Liberty Latin

Given the investment horizon of 90 days American Nortel Communications is expected to generate 4.9 times more return on investment than Liberty Latin. However, American Nortel is 4.9 times more volatile than Liberty Latin America. It trades about 0.07 of its potential returns per unit of risk. Liberty Latin America is currently generating about 0.0 per unit of risk. If you would invest  1.94  in American Nortel Communications on October 21, 2024 and sell it today you would earn a total of  0.85  from holding American Nortel Communications or generate 43.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.43%
Values	Daily Returns

American Nortel Communications  vs.  Liberty Latin America

American Nortel Comm

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in American Nortel Communications are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, American Nortel displayed solid returns over the last few months and may actually be approaching a breakup point.

Liberty Latin America

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Liberty Latin America has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with American Nortel and Liberty Latin

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

The idea behind American Nortel Communications and Liberty Latin America 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.