Correlation Between Liberty Broadband and Telia Company

Can any of the company-specific risk be diversified away by investing in both Liberty Broadband and Telia Company 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 Telia Company 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 Telia Company AB, you can compare the effects of market volatilities on Liberty Broadband and Telia Company 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 Telia Company. Check out your portfolio center. Please also check ongoing floating volatility patterns of Liberty Broadband and Telia Company.

Diversification Opportunities for Liberty Broadband and Telia Company

0.43

Correlation Coefficient

Liberty Broadband  Telia Company

Very weak diversification

The 3 months correlation between Liberty and Telia is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Liberty Broadband Corp and Telia Company AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telia Company 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 Telia Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telia Company has no effect on the direction of Liberty Broadband i.e., Liberty Broadband and Telia Company go up and down completely randomly.

Pair Corralation between Liberty Broadband and Telia Company

Assuming the 90 days horizon Liberty Broadband Corp is expected to generate 0.56 times more return on investment than Telia Company. However, Liberty Broadband Corp is 1.79 times less risky than Telia Company. It trades about 0.05 of its potential returns per unit of risk. Telia Company AB is currently generating about -0.29 per unit of risk. If you would invest  2,017  in Liberty Broadband Corp on October 14, 2024 and sell it today you would earn a total of  510.00  from holding Liberty Broadband Corp or generate 25.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	3.02%
Values	Daily Returns

Liberty Broadband Corp  vs.  Telia Company AB

Liberty Broadband Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Broadband Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile fundamental indicators, Liberty Broadband may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Telia Company

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Telia Company AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Telia Company 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 Telia Company

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

The idea behind Liberty Broadband Corp and Telia Company AB 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.