Correlation Between Graham Holdings and Liberty Broadband

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

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

Diversification Opportunities for Graham Holdings and Liberty Broadband

0.47

Correlation Coefficient

Graham Holdings  Liberty Broadband

Very weak diversification

The 3 months correlation between Graham and Liberty is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Graham Holdings Co and Liberty Broadband in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Broadband and Graham Holdings 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 Graham Holdings Co 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 Graham Holdings i.e., Graham Holdings and Liberty Broadband go up and down completely randomly.

Pair Corralation between Graham Holdings and Liberty Broadband

Assuming the 90 days trading horizon Graham Holdings Co is expected to generate 0.82 times more return on investment than Liberty Broadband. However, Graham Holdings Co is 1.22 times less risky than Liberty Broadband. It trades about 0.05 of its potential returns per unit of risk. Liberty Broadband is currently generating about 0.02 per unit of risk. If you would invest  83,831  in Graham Holdings Co on December 22, 2024 and sell it today you would earn a total of  4,169  from holding Graham Holdings Co or generate 4.97% return on investment over 90 days.

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

Graham Holdings Co  vs.  Liberty Broadband

Graham Holdings

Risk-Adjusted Performance

Insignificant

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

Liberty Broadband

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Broadband are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Liberty Broadband is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Graham Holdings and Liberty Broadband

The main advantage of trading using opposite Graham Holdings and Liberty Broadband positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Graham Holdings 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 Graham Holdings Co 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.

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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.