Correlation Between Liberty Media and Kuke Music

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

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

Diversification Opportunities for Liberty Media and Kuke Music

-0.68

Correlation Coefficient

Liberty Media  Kuke Music

Excellent diversification

The 3 months correlation between Liberty and Kuke is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Liberty Media and Kuke Music Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kuke Music Holding 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 Kuke Music. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kuke Music Holding has no effect on the direction of Liberty Media i.e., Liberty Media and Kuke Music go up and down completely randomly.

Pair Corralation between Liberty Media and Kuke Music

Assuming the 90 days horizon Liberty Media is expected to generate 0.14 times more return on investment than Kuke Music. However, Liberty Media is 6.92 times less risky than Kuke Music. It trades about 0.21 of its potential returns per unit of risk. Kuke Music Holding is currently generating about -0.01 per unit of risk. If you would invest  7,539  in Liberty Media on September 13, 2024 and sell it today you would earn a total of  1,837  from holding Liberty Media or generate 24.37% return on investment over 90 days.

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

Liberty Media  vs.  Kuke Music Holding

Liberty Media

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Media are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Liberty Media disclosed solid returns over the last few months and may actually be approaching a breakup point.

Kuke Music Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kuke Music Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward-looking signals, Kuke Music is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Liberty Media and Kuke Music

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

The idea behind Liberty Media and Kuke Music Holding 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.

Check out your portfolio center.

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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.