Correlation Between Liberty Broadband and Medtronic Plc

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

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

Diversification Opportunities for Liberty Broadband and Medtronic Plc

0.41

Correlation Coefficient

Liberty Broadband  Medtronic Plc

Very weak diversification

The 3 months correlation between Liberty and Medtronic is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Liberty Broadband and Medtronic plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medtronic plc and Liberty Broadband 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 Broadband are associated (or correlated) with Medtronic Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medtronic plc has no effect on the direction of Liberty Broadband i.e., Liberty Broadband and Medtronic Plc go up and down completely randomly.

Pair Corralation between Liberty Broadband and Medtronic Plc

Assuming the 90 days trading horizon Liberty Broadband is expected to under-perform the Medtronic Plc. In addition to that, Liberty Broadband is 2.18 times more volatile than Medtronic plc. It trades about -0.14 of its total potential returns per unit of risk. Medtronic plc is currently generating about -0.03 per unit of volatility. If you would invest  25,159  in Medtronic plc on October 6, 2024 and sell it today you would lose (209.00) from holding Medtronic plc or give up 0.83% of portfolio value over 90 days.

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

Liberty Broadband  vs.  Medtronic plc

Liberty Broadband

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Broadband are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Liberty Broadband sustained solid returns over the last few months and may actually be approaching a breakup point.

Medtronic plc

Risk-Adjusted Performance

4 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Medtronic plc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Medtronic Plc is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Liberty Broadband and Medtronic Plc

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

The idea behind Liberty Broadband and Medtronic plc 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 Transaction History module to view history of all your transactions and understand their impact on performance.