Correlation Between Madison Square and Liberty Broadband
Can any of the company-specific risk be diversified away by investing in both Madison Square 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 Madison Square and Liberty Broadband into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Madison Square Garden and Liberty Broadband, you can compare the effects of market volatilities on Madison Square 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 Madison Square with a short position of Liberty Broadband. Check out your portfolio center. Please also check ongoing floating volatility patterns of Madison Square and Liberty Broadband.
Diversification Opportunities for Madison Square and Liberty Broadband
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Madison and Liberty is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Madison Square Garden and Liberty Broadband in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Broadband and Madison Square 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 Madison Square Garden 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 Madison Square i.e., Madison Square and Liberty Broadband go up and down completely randomly.
Pair Corralation between Madison Square and Liberty Broadband
Assuming the 90 days horizon Madison Square is expected to generate 1.22 times less return on investment than Liberty Broadband. But when comparing it to its historical volatility, Madison Square Garden is 2.71 times less risky than Liberty Broadband. It trades about 0.23 of its potential returns per unit of risk. Liberty Broadband is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 7,350 in Liberty Broadband on September 2, 2024 and sell it today you would earn a total of 600.00 from holding Liberty Broadband or generate 8.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Madison Square Garden vs. Liberty Broadband
Performance |
| Timeline |
| Madison Square Garden |
| Liberty Broadband |
Madison Square and Liberty Broadband Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Madison Square and Liberty Broadband
The main advantage of trading using opposite Madison Square and Liberty Broadband positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Madison Square 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.| Madison Square vs. Li Ning Company | Madison Square vs. Trip Group Limited | Madison Square vs. Superior Plus Corp | Madison Square vs. NMI Holdings |
| Liberty Broadband vs. China BlueChemical | Liberty Broadband vs. KINGBOARD CHEMICAL | Liberty Broadband vs. LION ONE METALS | Liberty Broadband vs. Harmony Gold Mining |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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