Correlation Between Liberty Broadband and National Health
Can any of the company-specific risk be diversified away by investing in both Liberty Broadband and National Health 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 National Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Liberty Broadband and National Health Investors, you can compare the effects of market volatilities on Liberty Broadband and National Health 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 National Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Liberty Broadband and National Health.
Diversification Opportunities for Liberty Broadband and National Health
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Liberty and National is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Liberty Broadband and National Health Investors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Health Investors 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 National Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Health Investors has no effect on the direction of Liberty Broadband i.e., Liberty Broadband and National Health go up and down completely randomly.
Pair Corralation between Liberty Broadband and National Health
Assuming the 90 days horizon Liberty Broadband is expected to under-perform the National Health. But the stock apears to be less risky and, when comparing its historical volatility, Liberty Broadband is 1.11 times less risky than National Health. The stock trades about -0.06 of its potential returns per unit of risk. The National Health Investors is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 6,708 in National Health Investors on October 19, 2024 and sell it today you would lose (58.00) from holding National Health Investors or give up 0.86% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 94.44% |
| Values | Daily Returns |
Liberty Broadband vs. National Health Investors
Performance |
| Timeline |
| Liberty Broadband |
| National Health Investors |
Liberty Broadband and National Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Liberty Broadband and National Health
The main advantage of trading using opposite Liberty Broadband and National Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Liberty Broadband position performs unexpectedly, National Health 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 National Health will offset losses from the drop in National Health's long position.| Liberty Broadband vs. PLAYMATES TOYS | Liberty Broadband vs. USWE SPORTS AB | Liberty Broadband vs. Playmates Toys Limited | Liberty Broadband vs. Wizz Air Holdings |
| National Health vs. Liberty Broadband | National Health vs. GOLD ROAD RES | National Health vs. EVS Broadcast Equipment | National Health vs. Samsung Electronics Co |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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