Correlation Between TelstraLimited and Liberty Broadband

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

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

Diversification Opportunities for TelstraLimited and Liberty Broadband

-0.29

Correlation Coefficient

TelstraLimited  Liberty Broadband

Very good diversification

The 3 months correlation between TelstraLimited and Liberty is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Telstra Limited and Liberty Broadband Srs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Broadband Srs and TelstraLimited 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 Telstra Limited 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 Srs has no effect on the direction of TelstraLimited i.e., TelstraLimited and Liberty Broadband go up and down completely randomly.

Pair Corralation between TelstraLimited and Liberty Broadband

Assuming the 90 days horizon Telstra Limited is expected to under-perform the Liberty Broadband. But the pink sheet apears to be less risky and, when comparing its historical volatility, Telstra Limited is 1.38 times less risky than Liberty Broadband. The pink sheet trades about 0.0 of its potential returns per unit of risk. The Liberty Broadband Srs is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  7,971  in Liberty Broadband Srs on August 30, 2024 and sell it today you would earn a total of  421.00  from holding Liberty Broadband Srs or generate 5.28% return on investment over 90 days.

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

Telstra Limited  vs.  Liberty Broadband Srs

Telstra Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Telstra Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, TelstraLimited is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Liberty Broadband Srs

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Broadband Srs are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain fundamental indicators, Liberty Broadband sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TelstraLimited and Liberty Broadband

The main advantage of trading using opposite TelstraLimited and Liberty Broadband positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TelstraLimited 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 Telstra Limited and Liberty Broadband Srs 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.