Correlation Between Liberty Media and IHeartMedia

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

By analyzing existing cross correlation between Liberty Media and iHeartMedia Class A, you can compare the effects of market volatilities on Liberty Media and IHeartMedia 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 IHeartMedia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Liberty Media and IHeartMedia.

Diversification Opportunities for Liberty Media and IHeartMedia

0.63

Correlation Coefficient

Liberty Media  IHeartMedia

Poor diversification

The 3 months correlation between Liberty and IHeartMedia is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Liberty Media and iHeartMedia Class A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iHeartMedia Class 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 IHeartMedia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iHeartMedia Class has no effect on the direction of Liberty Media i.e., Liberty Media and IHeartMedia go up and down completely randomly.

Pair Corralation between Liberty Media and IHeartMedia

Assuming the 90 days horizon Liberty Media is expected to generate 0.36 times more return on investment than IHeartMedia. However, Liberty Media is 2.81 times less risky than IHeartMedia. It trades about -0.03 of its potential returns per unit of risk. iHeartMedia Class A is currently generating about -0.03 per unit of risk. If you would invest  8,404  in Liberty Media on December 31, 2024 and sell it today you would lose (369.00) from holding Liberty Media or give up 4.39% of portfolio value over 90 days.

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

Liberty Media  vs.  iHeartMedia Class A

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.

iHeartMedia Class

Risk-Adjusted Performance

Very Weak

Over the last 90 days iHeartMedia Class A has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Liberty Media and IHeartMedia

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

The idea behind Liberty Media and iHeartMedia Class A 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.