Correlation Between Liberty Media and IHeartMedia
Can any of the company-specific risk be diversified away by investing in both Liberty Media and IHeartMedia 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 IHeartMedia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Liberty Media and iHeartMedia Class A, you can compare the effects of market volatilities on Liberty Media and IHeartMedia 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 IHeartMedia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Liberty Media and IHeartMedia.
Diversification Opportunities for Liberty Media and IHeartMedia
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Liberty and IHeartMedia is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Liberty Media and iHeartMedia Class A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iHeartMedia Class 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 are associated (or correlated) with IHeartMedia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iHeartMedia Class has no effect on the direction of Liberty Media i.e., Liberty Media and IHeartMedia go up and down completely randomly.
Pair Corralation between Liberty Media and IHeartMedia
Assuming the 90 days horizon Liberty Media is expected to generate 1.08 times less return on investment than IHeartMedia. But when comparing it to its historical volatility, Liberty Media is 4.55 times less risky than IHeartMedia. It trades about 0.08 of its potential returns per unit of risk. iHeartMedia Class A is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 300.00 in iHeartMedia Class A on August 27, 2024 and sell it today you would lose (60.00) from holding iHeartMedia Class A or give up 20.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Liberty Media vs. iHeartMedia Class A
Performance |
| Timeline |
| Liberty Media |
| iHeartMedia Class |
Liberty Media and IHeartMedia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Liberty Media and IHeartMedia
The main advantage of trading using opposite Liberty Media and IHeartMedia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Liberty Media position performs unexpectedly, IHeartMedia 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 IHeartMedia will offset losses from the drop in IHeartMedia's long position.| Liberty Media vs. ADTRAN Inc | Liberty Media vs. Belden Inc | Liberty Media vs. ADC Therapeutics SA | Liberty Media vs. Comtech Telecommunications Corp |
| IHeartMedia vs. Walt Disney | IHeartMedia vs. Roku Inc | IHeartMedia vs. Netflix | IHeartMedia vs. AMC Entertainment 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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