Correlation Between Charles Schwab and Liberty Broadband

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

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

Diversification Opportunities for Charles Schwab and Liberty Broadband

0.66

Correlation Coefficient

Charles Schwab  Liberty Broadband

Poor diversification

The 3 months correlation between Charles and Liberty is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding The Charles Schwab and Liberty Broadband in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Broadband and Charles Schwab 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 The Charles Schwab 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 has no effect on the direction of Charles Schwab i.e., Charles Schwab and Liberty Broadband go up and down completely randomly.

Pair Corralation between Charles Schwab and Liberty Broadband

Assuming the 90 days trading horizon The Charles Schwab is expected to under-perform the Liberty Broadband. But the stock apears to be less risky and, when comparing its historical volatility, The Charles Schwab is 1.4 times less risky than Liberty Broadband. The stock trades about -0.4 of its potential returns per unit of risk. The Liberty Broadband is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  3,990  in Liberty Broadband on October 9, 2024 and sell it today you would lose (100.00) from holding Liberty Broadband or give up 2.51% of portfolio value over 90 days.

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

The Charles Schwab  vs.  Liberty Broadband

Charles Schwab

Risk-Adjusted Performance

15 of 100

Solid

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

Liberty Broadband

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Broadband are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Liberty Broadband may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Charles Schwab and Liberty Broadband

The main advantage of trading using opposite Charles Schwab and Liberty Broadband positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Charles Schwab 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 The Charles Schwab and Liberty Broadband 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.