Correlation Between Liberty Media and News Corp

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

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

Diversification Opportunities for Liberty Media and News Corp

0.75

Correlation Coefficient

Liberty Media  News Corp

Poor diversification

The 3 months correlation between Liberty and News is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Liberty Media and News Corp B in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on News Corp B 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 News Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of News Corp B has no effect on the direction of Liberty Media i.e., Liberty Media and News Corp go up and down completely randomly.

Pair Corralation between Liberty Media and News Corp

Assuming the 90 days horizon Liberty Media is expected to under-perform the News Corp. In addition to that, Liberty Media is 1.38 times more volatile than News Corp B. It trades about -0.04 of its total potential returns per unit of risk. News Corp B is currently generating about -0.02 per unit of volatility. If you would invest  3,023  in News Corp B on December 28, 2024 and sell it today you would lose (57.00) from holding News Corp B or give up 1.89% 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.  News Corp B

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 quite persistent basic indicators, Liberty Media is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

News Corp B

Risk-Adjusted Performance

Very Weak

Over the last 90 days News Corp B has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, News Corp is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Liberty Media and News Corp

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

The idea behind Liberty Media and News Corp B 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.