Correlation Between Liberty Latin and Liberty Broadband

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

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

Diversification Opportunities for Liberty Latin and Liberty Broadband

-0.27

Correlation Coefficient

Liberty Latin  Liberty Broadband

Very good diversification

The 3 months correlation between Liberty and Liberty is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Liberty Latin America and Liberty Broadband Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Broadband Corp and Liberty Latin 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 Latin America are associated (or correlated) with Liberty Broadband. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liberty Broadband Corp has no effect on the direction of Liberty Latin i.e., Liberty Latin and Liberty Broadband go up and down completely randomly.

Pair Corralation between Liberty Latin and Liberty Broadband

Given the investment horizon of 90 days Liberty Latin is expected to generate 4.72 times less return on investment than Liberty Broadband. In addition to that, Liberty Latin is 2.45 times more volatile than Liberty Broadband Corp. It trades about 0.01 of its total potential returns per unit of risk. Liberty Broadband Corp is currently generating about 0.12 per unit of volatility. If you would invest  2,364  in Liberty Broadband Corp on November 28, 2024 and sell it today you would earn a total of  166.00  from holding Liberty Broadband Corp or generate 7.02% return on investment over 90 days.

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

Liberty Latin America  vs.  Liberty Broadband Corp

Liberty Latin America

Risk-Adjusted Performance

Very Weak

Over the last 90 days Liberty Latin America has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong essential indicators, Liberty Latin is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Liberty Broadband Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Broadband Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental indicators, Liberty Broadband may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Liberty Latin and Liberty Broadband

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

The idea behind Liberty Latin America and Liberty Broadband Corp 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.