Correlation Between Lions Gate and Liberty Media

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

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

Diversification Opportunities for Lions Gate and Liberty Media

0.6

Correlation Coefficient

Lions Gate  Liberty Media

Poor diversification

The 3 months correlation between Lions and Liberty is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Lions Gate Entertainment and Liberty Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Media and Lions Gate 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 Lions Gate Entertainment are associated (or correlated) with Liberty Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liberty Media has no effect on the direction of Lions Gate i.e., Lions Gate and Liberty Media go up and down completely randomly.

Pair Corralation between Lions Gate and Liberty Media

Assuming the 90 days horizon Lions Gate is expected to generate 2.55 times less return on investment than Liberty Media. In addition to that, Lions Gate is 1.48 times more volatile than Liberty Media. It trades about 0.05 of its total potential returns per unit of risk. Liberty Media is currently generating about 0.19 per unit of volatility. If you would invest  7,759  in Liberty Media on September 15, 2024 and sell it today you would earn a total of  1,750  from holding Liberty Media or generate 22.55% return on investment over 90 days.

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

Lions Gate Entertainment  vs.  Liberty Media

Lions Gate Entertainment

Risk-Adjusted Performance

4 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lions Gate Entertainment are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Lions Gate may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Liberty Media

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Media are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Liberty Media disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lions Gate and Liberty Media

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

The idea behind Lions Gate Entertainment and Liberty Media 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.