Correlation Between Liberty Media and Federal Home
Can any of the company-specific risk be diversified away by investing in both Liberty Media and Federal Home 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 Federal Home into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Liberty Media and Federal Home Loan, you can compare the effects of market volatilities on Liberty Media and Federal Home 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 Federal Home. Check out your portfolio center. Please also check ongoing floating volatility patterns of Liberty Media and Federal Home.
Diversification Opportunities for Liberty Media and Federal Home
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Liberty and Federal is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Liberty Media and Federal Home Loan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal Home Loan 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 Federal Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal Home Loan has no effect on the direction of Liberty Media i.e., Liberty Media and Federal Home go up and down completely randomly.
Pair Corralation between Liberty Media and Federal Home
Assuming the 90 days horizon Liberty Media is expected to generate 4.75 times less return on investment than Federal Home. But when comparing it to its historical volatility, Liberty Media is 6.47 times less risky than Federal Home. It trades about 0.42 of its potential returns per unit of risk. Federal Home Loan is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest 657.00 in Federal Home Loan on September 1, 2024 and sell it today you would earn a total of 934.00 from holding Federal Home Loan or generate 142.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Liberty Media vs. Federal Home Loan
Performance |
| Timeline |
| Liberty Media |
| Federal Home Loan |
Liberty Media and Federal Home Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Liberty Media and Federal Home
The main advantage of trading using opposite Liberty Media and Federal Home positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Liberty Media position performs unexpectedly, Federal Home 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 Federal Home will offset losses from the drop in Federal Home's long position.| Liberty Media vs. Stepstone Group | Liberty Media vs. Morgan Stanley | Liberty Media vs. SEI Investments | Liberty Media vs. Artisan Partners Asset |
| Federal Home vs. Federal National Mortgage | Federal Home vs. HUMANA INC | Federal Home vs. SCOR PK | Federal Home vs. Aquagold International |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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