Correlation Between Liberty Media and AMC Entertainment

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

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

Diversification Opportunities for Liberty Media and AMC Entertainment

0.21

Correlation Coefficient

Liberty Media  AMC Entertainment

Modest diversification

The 3 months correlation between Liberty and AMC is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Liberty Media and AMC Entertainment Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMC Entertainment and Liberty Media 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 Liberty Media are associated (or correlated) with AMC Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMC Entertainment has no effect on the direction of Liberty Media i.e., Liberty Media and AMC Entertainment go up and down completely randomly.

Pair Corralation between Liberty Media and AMC Entertainment

Assuming the 90 days horizon Liberty Media is expected to generate 4.44 times less return on investment than AMC Entertainment. But when comparing it to its historical volatility, Liberty Media is 9.79 times less risky than AMC Entertainment. It trades about 0.09 of its potential returns per unit of risk. AMC Entertainment Holdings is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  466.00  in AMC Entertainment Holdings on February 18, 2024 and sell it today you would lose (26.00) from holding AMC Entertainment Holdings or give up 5.58% of portfolio value over 90 days.

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

Liberty Media  vs.  AMC Entertainment Holdings

Liberty Media

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Media are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Liberty Media may actually be approaching a critical reversion point that can send shares even higher in June 2024.

AMC Entertainment

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AMC Entertainment Holdings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak primary indicators, AMC Entertainment exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Liberty Media and AMC Entertainment

The main advantage of trading using opposite Liberty Media and AMC Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Liberty Media position performs unexpectedly, AMC Entertainment 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 AMC Entertainment will offset losses from the drop in AMC Entertainment's long position.

The idea behind Liberty Media and AMC Entertainment Holdings 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.