Correlation Between Liberty Media and Gaia

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

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

Diversification Opportunities for Liberty Media and Gaia

0.54

Correlation Coefficient

Liberty Media  Gaia

Very weak diversification

The 3 months correlation between Liberty and Gaia is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Liberty Media and Gaia Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gaia Inc and Liberty Media 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 Media are associated (or correlated) with Gaia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gaia Inc has no effect on the direction of Liberty Media i.e., Liberty Media and Gaia go up and down completely randomly.

Pair Corralation between Liberty Media and Gaia

Assuming the 90 days horizon Liberty Media is expected to generate 0.55 times more return on investment than Gaia. However, Liberty Media is 1.81 times less risky than Gaia. It trades about -0.03 of its potential returns per unit of risk. Gaia Inc is currently generating about -0.03 per unit of risk. If you would invest  8,512  in Liberty Media on December 29, 2024 and sell it today you would lose (402.00) from holding Liberty Media or give up 4.72% of portfolio value over 90 days.

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

Liberty Media  vs.  Gaia Inc

Liberty Media

Risk-Adjusted Performance

Very Weak

Over the last 90 days Liberty Media has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Liberty Media is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Gaia Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gaia Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Liberty Media and Gaia

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

The idea behind Liberty Media and Gaia Inc 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.