Correlation Between GEA GROUP and Liberty Broadband
Can any of the company-specific risk be diversified away by investing in both GEA GROUP 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 GEA GROUP and Liberty Broadband into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GEA GROUP and Liberty Broadband, you can compare the effects of market volatilities on GEA GROUP 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 GEA GROUP with a short position of Liberty Broadband. Check out your portfolio center. Please also check ongoing floating volatility patterns of GEA GROUP and Liberty Broadband.
Diversification Opportunities for GEA GROUP and Liberty Broadband
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between GEA and Liberty is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding GEA GROUP and Liberty Broadband in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Broadband and GEA GROUP 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 GEA GROUP 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 GEA GROUP i.e., GEA GROUP and Liberty Broadband go up and down completely randomly.
Pair Corralation between GEA GROUP and Liberty Broadband
Assuming the 90 days horizon GEA GROUP is expected to generate 0.41 times more return on investment than Liberty Broadband. However, GEA GROUP is 2.41 times less risky than Liberty Broadband. It trades about 0.11 of its potential returns per unit of risk. Liberty Broadband is currently generating about 0.03 per unit of risk. If you would invest 3,169 in GEA GROUP on August 25, 2024 and sell it today you would earn a total of 1,379 from holding GEA GROUP or generate 43.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
GEA GROUP vs. Liberty Broadband
Performance |
| Timeline |
| GEA GROUP |
| Liberty Broadband |
GEA GROUP and Liberty Broadband Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GEA GROUP and Liberty Broadband
The main advantage of trading using opposite GEA GROUP and Liberty Broadband positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GEA GROUP 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.| GEA GROUP vs. Liberty Broadband | GEA GROUP vs. AGF Management Limited | GEA GROUP vs. Coor Service Management | GEA GROUP vs. TRAINLINE PLC LS |
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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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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