Correlation Between Liberty Media and Paramount Global

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

By analyzing existing cross correlation between Liberty Media and Paramount Global Class, you can compare the effects of market volatilities on Liberty Media and Paramount Global 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 Paramount Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Liberty Media and Paramount Global.

Diversification Opportunities for Liberty Media and Paramount Global

-0.27

Correlation Coefficient

Liberty Media  Paramount Global

Very good diversification

The 3 months correlation between Liberty and Paramount is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Liberty Media and Paramount Global Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paramount Global Class 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 Paramount Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paramount Global Class has no effect on the direction of Liberty Media i.e., Liberty Media and Paramount Global go up and down completely randomly.

Pair Corralation between Liberty Media and Paramount Global

Assuming the 90 days horizon Liberty Media is expected to generate 2.42 times more return on investment than Paramount Global. However, Liberty Media is 2.42 times more volatile than Paramount Global Class. It trades about 0.11 of its potential returns per unit of risk. Paramount Global Class is currently generating about 0.12 per unit of risk. If you would invest  7,288  in Liberty Media on August 15, 2024 and sell it today you would earn a total of  210.00  from holding Liberty Media or generate 2.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Liberty Media  vs.  Paramount Global Class

Liberty Media

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Media are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Liberty Media may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Paramount Global Class

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Paramount Global Class has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Paramount Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Liberty Media and Paramount Global

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

The idea behind Liberty Media and Paramount Global Class 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.