Correlation Between STMicroelectronics and Liberty Broadband
Can any of the company-specific risk be diversified away by investing in both STMicroelectronics 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 STMicroelectronics and Liberty Broadband into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between STMicroelectronics NV and Liberty Broadband, you can compare the effects of market volatilities on STMicroelectronics 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 STMicroelectronics with a short position of Liberty Broadband. Check out your portfolio center. Please also check ongoing floating volatility patterns of STMicroelectronics and Liberty Broadband.
Diversification Opportunities for STMicroelectronics and Liberty Broadband
-0.13 | Correlation Coefficient |
Good diversification
The 3 months correlation between STMicroelectronics and Liberty is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV and Liberty Broadband in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Broadband and STMicroelectronics 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 STMicroelectronics NV 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 STMicroelectronics i.e., STMicroelectronics and Liberty Broadband go up and down completely randomly.
Pair Corralation between STMicroelectronics and Liberty Broadband
Assuming the 90 days trading horizon STMicroelectronics NV is expected to under-perform the Liberty Broadband. But the stock apears to be less risky and, when comparing its historical volatility, STMicroelectronics NV is 1.22 times less risky than Liberty Broadband. The stock trades about -0.06 of its potential returns per unit of risk. The Liberty Broadband is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 2,072 in Liberty Broadband on October 12, 2024 and sell it today you would earn a total of 1,818 from holding Liberty Broadband or generate 87.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.46% |
| Values | Daily Returns |
STMicroelectronics NV vs. Liberty Broadband
Performance |
| Timeline |
| STMicroelectronics |
| Liberty Broadband |
STMicroelectronics and Liberty Broadband Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with STMicroelectronics and Liberty Broadband
The main advantage of trading using opposite STMicroelectronics and Liberty Broadband positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STMicroelectronics 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.| STMicroelectronics vs. Check Point Software | STMicroelectronics vs. salesforce inc | STMicroelectronics vs. United Airlines Holdings | STMicroelectronics vs. Spotify Technology SA |
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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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