Correlation Between Smithson Investment and Liberty Media
Can any of the company-specific risk be diversified away by investing in both Smithson Investment and Liberty Media 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 Smithson Investment and Liberty Media into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Smithson Investment Trust and Liberty Media Corp, you can compare the effects of market volatilities on Smithson Investment and Liberty Media 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 Smithson Investment with a short position of Liberty Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smithson Investment and Liberty Media.
Diversification Opportunities for Smithson Investment and Liberty Media
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Smithson and Liberty is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Smithson Investment Trust and Liberty Media Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Media Corp and Smithson Investment 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 Smithson Investment Trust are associated (or correlated) with Liberty Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liberty Media Corp has no effect on the direction of Smithson Investment i.e., Smithson Investment and Liberty Media go up and down completely randomly.
Pair Corralation between Smithson Investment and Liberty Media
Assuming the 90 days trading horizon Smithson Investment Trust is expected to under-perform the Liberty Media. But the stock apears to be less risky and, when comparing its historical volatility, Smithson Investment Trust is 1.88 times less risky than Liberty Media. The stock trades about -0.11 of its potential returns per unit of risk. The Liberty Media Corp is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 8,081 in Liberty Media Corp on September 24, 2024 and sell it today you would earn a total of 464.00 from holding Liberty Media Corp or generate 5.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Smithson Investment Trust vs. Liberty Media Corp
Performance |
| Timeline |
| Smithson Investment Trust |
| Liberty Media Corp |
Smithson Investment and Liberty Media Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Smithson Investment and Liberty Media
The main advantage of trading using opposite Smithson Investment and Liberty Media positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smithson Investment position performs unexpectedly, Liberty Media 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 Media will offset losses from the drop in Liberty Media's long position.| Smithson Investment vs. Austevoll Seafood ASA | Smithson Investment vs. Cornish Metals | Smithson Investment vs. AMG Advanced Metallurgical | Smithson Investment vs. Axfood AB |
| Liberty Media vs. Uniper SE | Liberty Media vs. Mulberry Group PLC | Liberty Media vs. London Security Plc | Liberty Media vs. Triad Group PLC |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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