Correlation Between Sea and Liberty Media

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

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

Diversification Opportunities for Sea and Liberty Media

0.03

Correlation Coefficient

Sea  Liberty Media

Significant diversification

The 3 months correlation between Sea and Liberty is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Sea and Liberty Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Media and Sea 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 Sea 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 Sea i.e., Sea and Liberty Media go up and down completely randomly.

Pair Corralation between Sea and Liberty Media

Allowing for the 90-day total investment horizon Sea is expected to generate 1.54 times more return on investment than Liberty Media. However, Sea is 1.54 times more volatile than Liberty Media. It trades about 0.14 of its potential returns per unit of risk. Liberty Media is currently generating about -0.04 per unit of risk. If you would invest  10,748  in Sea on December 28, 2024 and sell it today you would earn a total of  2,609  from holding Sea or generate 24.27% return on investment over 90 days.

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

Sea  vs.  Liberty Media

Sea

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sea are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Sea exhibited solid returns over the last few months and may actually be approaching a breakup point.

Liberty Media

Risk-Adjusted Performance

Very Weak

Over the last 90 days Liberty Media has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Liberty Media is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Sea and Liberty Media

The main advantage of trading using opposite Sea and Liberty Media positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sea 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 Sea 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.