Correlation Between Liberty Broadband and Micron Technology

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

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

Diversification Opportunities for Liberty Broadband and Micron Technology

0.37

Correlation Coefficient

Liberty Broadband  Micron Technology

Weak diversification

The 3 months correlation between Liberty and Micron is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Liberty Broadband and Micron Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Micron Technology 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 Micron Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Micron Technology has no effect on the direction of Liberty Broadband i.e., Liberty Broadband and Micron Technology go up and down completely randomly.

Pair Corralation between Liberty Broadband and Micron Technology

Assuming the 90 days trading horizon Liberty Broadband is expected to generate 6.42 times less return on investment than Micron Technology. But when comparing it to its historical volatility, Liberty Broadband is 1.21 times less risky than Micron Technology. It trades about 0.01 of its potential returns per unit of risk. Micron Technology is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  4,857  in Micron Technology on October 10, 2024 and sell it today you would earn a total of  5,563  from holding Micron Technology or generate 114.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.59%
Values	Daily Returns

Liberty Broadband  vs.  Micron Technology

Liberty Broadband

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Broadband are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Liberty Broadband is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Micron Technology

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Micron Technology are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Micron Technology may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Liberty Broadband and Micron Technology

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

The idea behind Liberty Broadband and Micron Technology 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.