Correlation Between Liberty Broadband and Electronic Arts
Can any of the company-specific risk be diversified away by investing in both Liberty Broadband and Electronic Arts 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 Electronic Arts into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Liberty Broadband and Electronic Arts, you can compare the effects of market volatilities on Liberty Broadband and Electronic Arts 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 Electronic Arts. Check out your portfolio center. Please also check ongoing floating volatility patterns of Liberty Broadband and Electronic Arts.
Diversification Opportunities for Liberty Broadband and Electronic Arts
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Liberty and Electronic is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Liberty Broadband and Electronic Arts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electronic Arts 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 are associated (or correlated) with Electronic Arts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electronic Arts has no effect on the direction of Liberty Broadband i.e., Liberty Broadband and Electronic Arts go up and down completely randomly.
Pair Corralation between Liberty Broadband and Electronic Arts
Assuming the 90 days horizon Liberty Broadband is expected to generate 2.17 times less return on investment than Electronic Arts. In addition to that, Liberty Broadband is 2.32 times more volatile than Electronic Arts. It trades about 0.01 of its total potential returns per unit of risk. Electronic Arts is currently generating about 0.07 per unit of volatility. If you would invest 12,364 in Electronic Arts on September 12, 2024 and sell it today you would earn a total of 3,502 from holding Electronic Arts or generate 28.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 86.87% |
| Values | Daily Returns |
Liberty Broadband vs. Electronic Arts
Performance |
| Timeline |
| Liberty Broadband |
| Electronic Arts |
Liberty Broadband and Electronic Arts Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Liberty Broadband and Electronic Arts
The main advantage of trading using opposite Liberty Broadband and Electronic Arts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Liberty Broadband position performs unexpectedly, Electronic Arts 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 Electronic Arts will offset losses from the drop in Electronic Arts' long position.| Liberty Broadband vs. Comcast | Liberty Broadband vs. WideOpenWest | Liberty Broadband vs. Superior Plus Corp | Liberty Broadband vs. NMI Holdings |
| Electronic Arts vs. Apple Inc | Electronic Arts vs. Apple Inc | Electronic Arts vs. Apple Inc | Electronic Arts vs. Apple Inc |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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