Correlation Between Liberty Media and Warner Bros
Can any of the company-specific risk be diversified away by investing in both Liberty Media and Warner Bros 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 Warner Bros into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Liberty Media and Warner Bros Discovery, you can compare the effects of market volatilities on Liberty Media and Warner Bros 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 Warner Bros. Check out your portfolio center. Please also check ongoing floating volatility patterns of Liberty Media and Warner Bros.
Diversification Opportunities for Liberty Media and Warner Bros
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Liberty and Warner is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Liberty Media and Warner Bros Discovery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Warner Bros Discovery 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 Warner Bros. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Warner Bros Discovery has no effect on the direction of Liberty Media i.e., Liberty Media and Warner Bros go up and down completely randomly.
Pair Corralation between Liberty Media and Warner Bros
Assuming the 90 days horizon Liberty Media is expected to generate 9.41 times more return on investment than Warner Bros. However, Liberty Media is 9.41 times more volatile than Warner Bros Discovery. It trades about 0.05 of its potential returns per unit of risk. Warner Bros Discovery is currently generating about 0.01 per unit of risk. If you would invest 1,490 in Liberty Media on August 30, 2024 and sell it today you would earn a total of 5,827 from holding Liberty Media or generate 391.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 94.34% |
| Values | Daily Returns |
Liberty Media vs. Warner Bros Discovery
Performance |
| Timeline |
| Liberty Media |
| Warner Bros Discovery |
Liberty Media and Warner Bros Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Liberty Media and Warner Bros
The main advantage of trading using opposite Liberty Media and Warner Bros positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Liberty Media position performs unexpectedly, Warner Bros 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 Warner Bros will offset losses from the drop in Warner Bros' long position.| Liberty Media vs. Imax Corp | Liberty Media vs. Liberty Media | Liberty Media vs. Liberty Media | Liberty Media vs. Hall of Fame |
| Warner Bros vs. Walt Disney | Warner Bros vs. Roku Inc | Warner Bros vs. Netflix | Warner Bros vs. Paramount Global Class |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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