Correlation Between Select Medical and Liberty Broadband
Can any of the company-specific risk be diversified away by investing in both Select Medical 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 Select Medical and Liberty Broadband into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Select Medical Holdings and Liberty Broadband, you can compare the effects of market volatilities on Select Medical 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 Select Medical with a short position of Liberty Broadband. Check out your portfolio center. Please also check ongoing floating volatility patterns of Select Medical and Liberty Broadband.
Diversification Opportunities for Select Medical and Liberty Broadband
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Select and Liberty is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Select Medical Holdings and Liberty Broadband in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Broadband and Select Medical 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 Select Medical Holdings 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 Select Medical i.e., Select Medical and Liberty Broadband go up and down completely randomly.
Pair Corralation between Select Medical and Liberty Broadband
Assuming the 90 days horizon Select Medical Holdings is expected to generate 0.96 times more return on investment than Liberty Broadband. However, Select Medical Holdings is 1.04 times less risky than Liberty Broadband. It trades about 0.07 of its potential returns per unit of risk. Liberty Broadband is currently generating about -0.03 per unit of risk. If you would invest 1,850 in Select Medical Holdings on November 3, 2024 and sell it today you would earn a total of 50.00 from holding Select Medical Holdings or generate 2.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Select Medical Holdings vs. Liberty Broadband
Performance |
| Timeline |
| Select Medical Holdings |
| Liberty Broadband |
Select Medical and Liberty Broadband Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Select Medical and Liberty Broadband
The main advantage of trading using opposite Select Medical and Liberty Broadband positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Select Medical 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.| Select Medical vs. British American Tobacco | Select Medical vs. Urban Outfitters | Select Medical vs. G III APPAREL GROUP | Select Medical vs. OPKO HEALTH |
| Liberty Broadband vs. Gaztransport Technigaz SA | Liberty Broadband vs. SOEDER SPORTFISKE AB | Liberty Broadband vs. PARKEN Sport Entertainment | Liberty Broadband vs. MICRONIC MYDATA |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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