Correlation Between Apple and Liberty Broadband
Can any of the company-specific risk be diversified away by investing in both Apple 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 Apple and Liberty Broadband into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Apple Inc and Liberty Broadband, you can compare the effects of market volatilities on Apple 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 Apple with a short position of Liberty Broadband. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and Liberty Broadband.
Diversification Opportunities for Apple and Liberty Broadband
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Apple and Liberty is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Liberty Broadband in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Broadband and Apple 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 Apple Inc 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 has no effect on the direction of Apple i.e., Apple and Liberty Broadband go up and down completely randomly.
Pair Corralation between Apple and Liberty Broadband
Assuming the 90 days trading horizon Apple Inc is expected to generate 0.36 times more return on investment than Liberty Broadband. However, Apple Inc is 2.76 times less risky than Liberty Broadband. It trades about 0.64 of its potential returns per unit of risk. Liberty Broadband is currently generating about -0.32 per unit of risk. If you would invest 20,940 in Apple Inc on September 12, 2024 and sell it today you would earn a total of 2,555 from holding Apple Inc or generate 12.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Apple Inc vs. Liberty Broadband
Performance |
| Timeline |
| Apple Inc |
| Liberty Broadband |
Apple and Liberty Broadband Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Apple and Liberty Broadband
The main advantage of trading using opposite Apple and Liberty Broadband positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple 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.| Apple vs. Hyatt Hotels | Apple vs. Spirent Communications plc | Apple vs. Highlight Communications AG | Apple vs. MIRAMAR HOTEL INV |
| Liberty Broadband vs. Comcast | Liberty Broadband vs. WideOpenWest | Liberty Broadband vs. Superior Plus Corp | Liberty Broadband vs. NMI Holdings |
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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