Correlation Between Liberty Media and Smithson Investment
Can any of the company-specific risk be diversified away by investing in both Liberty Media and Smithson Investment 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 Media and Smithson Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Liberty Media Corp and Smithson Investment Trust, you can compare the effects of market volatilities on Liberty Media and Smithson Investment 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 Media with a short position of Smithson Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Liberty Media and Smithson Investment.
Diversification Opportunities for Liberty Media and Smithson Investment
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Liberty and Smithson is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Liberty Media Corp and Smithson Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smithson Investment Trust and Liberty Media 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 Media Corp are associated (or correlated) with Smithson Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smithson Investment Trust has no effect on the direction of Liberty Media i.e., Liberty Media and Smithson Investment go up and down completely randomly.
Pair Corralation between Liberty Media and Smithson Investment
Assuming the 90 days trading horizon Liberty Media Corp is expected to generate 1.88 times more return on investment than Smithson Investment. However, Liberty Media is 1.88 times more volatile than Smithson Investment Trust. It trades about 0.17 of its potential returns per unit of risk. Smithson Investment Trust is currently generating about -0.1 per unit of risk. If you would invest 8,081 in Liberty Media Corp on September 26, 2024 and sell it today you would earn a total of 424.00 from holding Liberty Media Corp or generate 5.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Liberty Media Corp vs. Smithson Investment Trust
Performance |
| Timeline |
| Liberty Media Corp |
| Smithson Investment Trust |
Liberty Media and Smithson Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Liberty Media and Smithson Investment
The main advantage of trading using opposite Liberty Media and Smithson Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Liberty Media position performs unexpectedly, Smithson Investment 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 Smithson Investment will offset losses from the drop in Smithson Investment's long position.| Liberty Media vs. Uniper SE | Liberty Media vs. Mulberry Group PLC | Liberty Media vs. London Security Plc | Liberty Media vs. Triad Group PLC |
| Smithson Investment vs. Kinnevik Investment AB | Smithson Investment vs. Molson Coors Beverage | Smithson Investment vs. Foresight Environmental Infrastructure | Smithson Investment vs. United Utilities Group |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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