Correlation Between AMC Entertainment and Liberty Media

Can any of the company-specific risk be diversified away by investing in both AMC Entertainment 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 AMC Entertainment and Liberty Media into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AMC Entertainment Holdings and Liberty Media, you can compare the effects of market volatilities on AMC Entertainment 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 AMC Entertainment with a short position of Liberty Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of AMC Entertainment and Liberty Media.

Diversification Opportunities for AMC Entertainment and Liberty Media

0.31

Correlation Coefficient

AMC Entertainment  Liberty Media

Weak diversification

The 3 months correlation between AMC and Liberty is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding AMC Entertainment Holdings and Liberty Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Media and AMC Entertainment 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 AMC Entertainment Holdings 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 AMC Entertainment i.e., AMC Entertainment and Liberty Media go up and down completely randomly.

Pair Corralation between AMC Entertainment and Liberty Media

Considering the 90-day investment horizon AMC Entertainment Holdings is expected to generate 8.23 times more return on investment than Liberty Media. However, AMC Entertainment is 8.23 times more volatile than Liberty Media. It trades about 0.15 of its potential returns per unit of risk. Liberty Media is currently generating about -0.23 per unit of risk. If you would invest  328.00  in AMC Entertainment Holdings on February 24, 2024 and sell it today you would earn a total of  127.00  from holding AMC Entertainment Holdings or generate 38.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

AMC Entertainment Holdings  vs.  Liberty Media

AMC Entertainment

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AMC Entertainment Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain primary indicators, AMC Entertainment exhibited solid returns over the last few months and may actually be approaching a breakup point.

Liberty Media

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Liberty Media has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's primary indicators remain quite persistent which may send shares a bit higher in June 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with AMC Entertainment and Liberty Media

The main advantage of trading using opposite AMC Entertainment and Liberty Media positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AMC Entertainment 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 AMC Entertainment Holdings 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.

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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.