Correlation Between Liberty Latin and Liberty Global

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

Diversification Opportunities for Liberty Latin and Liberty Global

-0.8

Correlation Coefficient

Liberty Latin  Liberty Global

Pay attention - limited upside

The 3 months correlation between Liberty and Liberty is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Liberty Latin America and Liberty Global PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Global PLC 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 Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liberty Global PLC has no effect on the direction of Liberty Latin i.e., Liberty Latin and Liberty Global go up and down completely randomly.

Pair Corralation between Liberty Latin and Liberty Global

Assuming the 90 days horizon Liberty Latin America is expected to under-perform the Liberty Global. In addition to that, Liberty Latin is 1.64 times more volatile than Liberty Global PLC. It trades about -0.11 of its total potential returns per unit of risk. Liberty Global PLC is currently generating about 0.26 per unit of volatility. If you would invest  997.00  in Liberty Global PLC on August 30, 2024 and sell it today you would earn a total of  402.00  from holding Liberty Global PLC or generate 40.32% return on investment over 90 days.

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

Liberty Latin America  vs.  Liberty Global PLC

Liberty Latin America

Risk-Adjusted Performance

0 of 100

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 conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in December 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Liberty Global PLC

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Global PLC are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Liberty Global sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Liberty Latin and Liberty Global

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

The idea behind Liberty Latin America and Liberty Global PLC 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..