Correlation Between Liberty Broadband and Ooma

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

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

Diversification Opportunities for Liberty Broadband and Ooma

0.06

Correlation Coefficient

Liberty Broadband  Ooma

Significant diversification

The 3 months correlation between Liberty and Ooma is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Liberty Broadband Corp and Ooma Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ooma Inc 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 Corp are associated (or correlated) with Ooma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ooma Inc has no effect on the direction of Liberty Broadband i.e., Liberty Broadband and Ooma go up and down completely randomly.

Pair Corralation between Liberty Broadband and Ooma

Assuming the 90 days horizon Liberty Broadband Corp is expected to generate 0.48 times more return on investment than Ooma. However, Liberty Broadband Corp is 2.1 times less risky than Ooma. It trades about 0.03 of its potential returns per unit of risk. Ooma Inc is currently generating about -0.07 per unit of risk. If you would invest  2,462  in Liberty Broadband Corp on December 29, 2024 and sell it today you would earn a total of  37.00  from holding Liberty Broadband Corp or generate 1.5% return on investment over 90 days.

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

Liberty Broadband Corp  vs.  Ooma Inc

Liberty Broadband Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Broadband Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental indicators, Liberty Broadband is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Ooma Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ooma Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Liberty Broadband and Ooma

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

The idea behind Liberty Broadband Corp and Ooma Inc 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.