Correlation Between Paramount Global and Liberty Media

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Can any of the company-specific risk be diversified away by investing in both Paramount Global 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 Paramount Global and Liberty Media into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Paramount Global Class and Liberty Media, you can compare the effects of market volatilities on Paramount Global 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 Paramount Global with a short position of Liberty Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of Paramount Global and Liberty Media.

Diversification Opportunities for Paramount Global and Liberty Media

0.37
  Correlation Coefficient

Weak diversification

The 3 months correlation between Paramount and Liberty is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Paramount Global Class and Liberty Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Media and Paramount Global 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 Paramount Global Class 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 Paramount Global i.e., Paramount Global and Liberty Media go up and down completely randomly.

Pair Corralation between Paramount Global and Liberty Media

Given the investment horizon of 90 days Paramount Global Class is expected to under-perform the Liberty Media. In addition to that, Paramount Global is 2.12 times more volatile than Liberty Media. It trades about -0.02 of its total potential returns per unit of risk. Liberty Media is currently generating about 0.06 per unit of volatility. If you would invest  5,477  in Liberty Media on September 29, 2024 and sell it today you would earn a total of  3,017  from holding Liberty Media or generate 55.08% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Paramount Global Class  vs.  Liberty Media

 Performance 
       Timeline  
Paramount Global Class 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Paramount Global Class has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Paramount Global is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.
Liberty Media 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Media are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Liberty Media sustained solid returns over the last few months and may actually be approaching a breakup point.

Paramount Global and Liberty Media Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Paramount Global and Liberty Media

The main advantage of trading using opposite Paramount Global and Liberty Media positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Paramount Global 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 Paramount Global Class 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.

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