Correlation Between Software Acquisition and Liberty Media

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

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

Diversification Opportunities for Software Acquisition and Liberty Media

-0.68

Correlation Coefficient

Software Acquisition  Liberty Media

Excellent diversification

The 3 months correlation between Software and Liberty is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Software Acquisition Group and Liberty Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Media and Software Acquisition 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 Software Acquisition Group 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 Software Acquisition i.e., Software Acquisition and Liberty Media go up and down completely randomly.

Pair Corralation between Software Acquisition and Liberty Media

Given the investment horizon of 90 days Software Acquisition Group is expected to under-perform the Liberty Media. In addition to that, Software Acquisition is 1.36 times more volatile than Liberty Media. It trades about -0.32 of its total potential returns per unit of risk. Liberty Media is currently generating about 0.24 per unit of volatility. If you would invest  8,559  in Liberty Media on September 14, 2024 and sell it today you would earn a total of  917.00  from holding Liberty Media or generate 10.71% return on investment over 90 days.

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

Software Acquisition Group  vs.  Liberty Media

Software Acquisition

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Software Acquisition Group 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 nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Liberty Media

Risk-Adjusted Performance

15 of 100

Solid

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

Pair Trading with Software Acquisition and Liberty Media

The main advantage of trading using opposite Software Acquisition and Liberty Media positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Software Acquisition 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 Software Acquisition Group 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.

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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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.