Correlation Between Liberty Latin and Liberty Broadband

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

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

Diversification Opportunities for Liberty Latin and Liberty Broadband

-0.14

Correlation Coefficient

Liberty Latin  Liberty Broadband

Good diversification

The 3 months correlation between Liberty and Liberty is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Liberty Latin America 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 Liberty Latin 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 Latin America 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 Liberty Latin i.e., Liberty Latin and Liberty Broadband go up and down completely randomly.

Pair Corralation between Liberty Latin and Liberty Broadband

Given the investment horizon of 90 days Liberty Latin America is expected to generate 1.31 times more return on investment than Liberty Broadband. However, Liberty Latin is 1.31 times more volatile than Liberty Broadband Srs. It trades about 0.19 of its potential returns per unit of risk. Liberty Broadband Srs is currently generating about -0.28 per unit of risk. If you would invest  700.00  in Liberty Latin America on January 30, 2024 and sell it today you would earn a total of  61.00  from holding Liberty Latin America or generate 8.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Liberty Latin America  vs.  Liberty Broadband Srs

Liberty Latin America

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Latin America are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain essential indicators, Liberty Latin may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Liberty Broadband Srs

Risk-Adjusted Performance

0 of 100

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 weak performance in the last few months, the Stock's fundamental indicators remain quite persistent which may send shares a bit higher in May 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Liberty Latin and Liberty Broadband

The main advantage of trading using opposite Liberty Latin and Liberty Broadband positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Liberty Latin 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 Liberty Latin America 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.