Correlation Between X FAB and Liberty Broadband
Can any of the company-specific risk be diversified away by investing in both X FAB 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 X FAB and Liberty Broadband into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between X FAB Silicon Foundries and Liberty Broadband, you can compare the effects of market volatilities on X FAB 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 X FAB with a short position of Liberty Broadband. Check out your portfolio center. Please also check ongoing floating volatility patterns of X FAB and Liberty Broadband.
Diversification Opportunities for X FAB and Liberty Broadband
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between XFB and Liberty is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding X FAB Silicon Foundries and Liberty Broadband in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Broadband and X FAB 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 X FAB Silicon Foundries 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 X FAB i.e., X FAB and Liberty Broadband go up and down completely randomly.
Pair Corralation between X FAB and Liberty Broadband
Assuming the 90 days trading horizon X FAB Silicon Foundries is expected to under-perform the Liberty Broadband. But the stock apears to be less risky and, when comparing its historical volatility, X FAB Silicon Foundries is 1.12 times less risky than Liberty Broadband. The stock trades about -0.02 of its potential returns per unit of risk. The Liberty Broadband is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 8,450 in Liberty Broadband on September 4, 2024 and sell it today you would lose (500.00) from holding Liberty Broadband or give up 5.92% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
X FAB Silicon Foundries vs. Liberty Broadband
Performance |
| Timeline |
| X FAB Silicon |
| Liberty Broadband |
X FAB and Liberty Broadband Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with X FAB and Liberty Broadband
The main advantage of trading using opposite X FAB and Liberty Broadband positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if X FAB 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.The idea behind X FAB Silicon Foundries and Liberty Broadband pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Liberty Broadband vs. Nok Airlines PCL | Liberty Broadband vs. Singapore Airlines Limited | Liberty Broadband vs. Southwest Airlines Co | Liberty Broadband vs. Gol Intelligent Airlines |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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