Correlation Between Liberty Broadband and SBA Communications

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Can any of the company-specific risk be diversified away by investing in both Liberty Broadband and SBA Communications 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 Liberty Broadband and SBA Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Liberty Broadband Srs and SBA Communications Corp, you can compare the effects of market volatilities on Liberty Broadband and SBA Communications 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 Liberty Broadband with a short position of SBA Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Liberty Broadband and SBA Communications.

Diversification Opportunities for Liberty Broadband and SBA Communications

0.83
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Liberty and SBA is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Liberty Broadband Srs and SBA Communications Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SBA Communications Corp and Liberty Broadband 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 Liberty Broadband Srs are associated (or correlated) with SBA Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SBA Communications Corp has no effect on the direction of Liberty Broadband i.e., Liberty Broadband and SBA Communications go up and down completely randomly.

Pair Corralation between Liberty Broadband and SBA Communications

Assuming the 90 days horizon Liberty Broadband Srs is expected to under-perform the SBA Communications. In addition to that, Liberty Broadband is 1.23 times more volatile than SBA Communications Corp. It trades about -0.06 of its total potential returns per unit of risk. SBA Communications Corp is currently generating about -0.04 per unit of volatility. If you would invest  35,206  in SBA Communications Corp on December 30, 2023 and sell it today you would lose (13,536) from holding SBA Communications Corp or give up 38.45% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Liberty Broadband Srs  vs.  SBA Communications Corp

 Performance 
       Timeline  
Liberty Broadband Srs 

Risk-Adjusted Performance

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Very Weak
Over the last 90 days Liberty Broadband Srs has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's fundamental indicators remain quite persistent which may send shares a bit higher in April 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.
SBA Communications Corp 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days SBA Communications Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Liberty Broadband and SBA Communications Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Liberty Broadband and SBA Communications

The main advantage of trading using opposite Liberty Broadband and SBA Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Liberty Broadband position performs unexpectedly, SBA Communications 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 SBA Communications will offset losses from the drop in SBA Communications' long position.
The idea behind Liberty Broadband Srs and SBA Communications Corp 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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