Correlation Between BII Railway and Liberty Broadband

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

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

Diversification Opportunities for BII Railway and Liberty Broadband

0.1

Correlation Coefficient

BII Railway  Liberty Broadband

Average diversification

The 3 months correlation between BII and Liberty is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding BII Railway Transportation and Liberty Broadband in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Broadband and BII Railway 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 BII Railway Transportation are associated (or correlated) with Liberty Broadband. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liberty Broadband has no effect on the direction of BII Railway i.e., BII Railway and Liberty Broadband go up and down completely randomly.

Pair Corralation between BII Railway and Liberty Broadband

Assuming the 90 days horizon BII Railway Transportation is expected to generate 0.97 times more return on investment than Liberty Broadband. However, BII Railway Transportation is 1.03 times less risky than Liberty Broadband. It trades about 0.01 of its potential returns per unit of risk. Liberty Broadband is currently generating about -0.18 per unit of risk. If you would invest  2.65  in BII Railway Transportation on September 17, 2024 and sell it today you would earn a total of  0.00  from holding BII Railway Transportation or generate 0.0% return on investment over 90 days.

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

BII Railway Transportation  vs.  Liberty Broadband

BII Railway Transpor

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BII Railway Transportation are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, BII Railway reported solid returns over the last few months and may actually be approaching a breakup point.

Liberty Broadband

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Broadband are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Liberty Broadband reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BII Railway and Liberty Broadband

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

The idea behind BII Railway Transportation and Liberty Broadband 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .