Correlation Between Liberty Broadband and PLDT

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

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

Diversification Opportunities for Liberty Broadband and PLDT

0.61

Correlation Coefficient

Liberty Broadband  PLDT

Poor diversification

The 3 months correlation between Liberty and PLDT is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Liberty Broadband Srs and PLDT Inc ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PLDT Inc ADR 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 Srs are associated (or correlated) with PLDT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PLDT Inc ADR has no effect on the direction of Liberty Broadband i.e., Liberty Broadband and PLDT go up and down completely randomly.

Pair Corralation between Liberty Broadband and PLDT

Assuming the 90 days horizon Liberty Broadband Srs is expected to generate 1.56 times more return on investment than PLDT. However, Liberty Broadband is 1.56 times more volatile than PLDT Inc ADR. It trades about 0.13 of its potential returns per unit of risk. PLDT Inc ADR is currently generating about 0.04 per unit of risk. If you would invest  7,424  in Liberty Broadband Srs on December 28, 2024 and sell it today you would earn a total of  1,080  from holding Liberty Broadband Srs or generate 14.55% return on investment over 90 days.

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

Liberty Broadband Srs  vs.  PLDT Inc ADR

Liberty Broadband Srs

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Broadband Srs are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting fundamental indicators, Liberty Broadband sustained solid returns over the last few months and may actually be approaching a breakup point.

PLDT Inc ADR

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PLDT Inc ADR are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical indicators, PLDT is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Liberty Broadband and PLDT

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

The idea behind Liberty Broadband Srs and PLDT Inc ADR 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 Transaction History module to view history of all your transactions and understand their impact on performance.