Correlation Between Liberty Broadband and American Airlines
Can any of the company-specific risk be diversified away by investing in both Liberty Broadband and American Airlines 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 American Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Liberty Broadband and American Airlines Group, you can compare the effects of market volatilities on Liberty Broadband and American Airlines 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 American Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Liberty Broadband and American Airlines.
Diversification Opportunities for Liberty Broadband and American Airlines
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Liberty and American is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Liberty Broadband and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines 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 American Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Airlines has no effect on the direction of Liberty Broadband i.e., Liberty Broadband and American Airlines go up and down completely randomly.
Pair Corralation between Liberty Broadband and American Airlines
Assuming the 90 days trading horizon Liberty Broadband is expected to under-perform the American Airlines. In addition to that, Liberty Broadband is 1.01 times more volatile than American Airlines Group. It trades about -0.13 of its total potential returns per unit of risk. American Airlines Group is currently generating about 0.03 per unit of volatility. If you would invest 10,487 in American Airlines Group on October 11, 2024 and sell it today you would earn a total of 94.00 from holding American Airlines Group or generate 0.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Liberty Broadband vs. American Airlines Group
Performance |
| Timeline |
| Liberty Broadband |
| American Airlines |
Liberty Broadband and American Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Liberty Broadband and American Airlines
The main advantage of trading using opposite Liberty Broadband and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Liberty Broadband position performs unexpectedly, American Airlines 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 American Airlines will offset losses from the drop in American Airlines' long position.| Liberty Broadband vs. Nordon Indstrias Metalrgicas | Liberty Broadband vs. Zebra Technologies | Liberty Broadband vs. Take Two Interactive Software | Liberty Broadband vs. Brpr Corporate Offices |
| American Airlines vs. Akamai Technologies, | American Airlines vs. Trane Technologies plc | American Airlines vs. Live Nation Entertainment, | American Airlines vs. DXC Technology |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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