Correlation Between News Corp and Liberty Media
Can any of the company-specific risk be diversified away by investing in both News Corp 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 News Corp and Liberty Media into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between News Corp A and Liberty Media, you can compare the effects of market volatilities on News Corp 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 News Corp with a short position of Liberty Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of News Corp and Liberty Media.
Diversification Opportunities for News Corp and Liberty Media
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between News and Liberty is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding News Corp A and Liberty Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Media and News Corp 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 News Corp A 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 has no effect on the direction of News Corp i.e., News Corp and Liberty Media go up and down completely randomly.
Pair Corralation between News Corp and Liberty Media
Given the investment horizon of 90 days News Corp A is expected to under-perform the Liberty Media. But the stock apears to be less risky and, when comparing its historical volatility, News Corp A is 1.3 times less risky than Liberty Media. The stock trades about -0.34 of its potential returns per unit of risk. The Liberty Media is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 5,998 in Liberty Media on January 20, 2024 and sell it today you would lose (32.00) from holding Liberty Media or give up 0.53% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
News Corp A vs. Liberty Media
Performance |
| Timeline |
| News Corp A |
| Liberty Media |
News Corp and Liberty Media Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with News Corp and Liberty Media
The main advantage of trading using opposite News Corp and Liberty Media positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if News Corp 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.The idea behind News Corp A and Liberty Media 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.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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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