Correlation Between Ooma and Liberty Broadband

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

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

Diversification Opportunities for Ooma and Liberty Broadband

0.25

Correlation Coefficient

Ooma  Liberty Broadband

Modest diversification

The 3 months correlation between Ooma and Liberty is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Ooma Inc 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 Ooma 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 Ooma Inc 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 Ooma i.e., Ooma and Liberty Broadband go up and down completely randomly.

Pair Corralation between Ooma and Liberty Broadband

Given the investment horizon of 90 days Ooma Inc is expected to generate 2.83 times more return on investment than Liberty Broadband. However, Ooma is 2.83 times more volatile than Liberty Broadband Corp. It trades about 0.29 of its potential returns per unit of risk. Liberty Broadband Corp is currently generating about 0.08 per unit of risk. If you would invest  1,059  in Ooma Inc on September 2, 2024 and sell it today you would earn a total of  421.00  from holding Ooma Inc or generate 39.75% return on investment over 90 days.

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

Ooma Inc  vs.  Liberty Broadband Corp

Ooma Inc

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ooma Inc are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain primary indicators, Ooma sustained solid returns over the last few months and may actually be approaching a breakup point.

Liberty Broadband Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Broadband Corp are ranked lower than 5 (%) 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.

Pair Trading with Ooma and Liberty Broadband

The main advantage of trading using opposite Ooma and Liberty Broadband positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ooma 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 Ooma Inc 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.

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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.