Correlation Between Liberty Broadband and Deutsche Telekom

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

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

Diversification Opportunities for Liberty Broadband and Deutsche Telekom

0.52

Correlation Coefficient

Liberty Broadband  Deutsche Telekom

Very weak diversification

The 3 months correlation between Liberty and Deutsche is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Liberty Broadband and Deutsche Telekom AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Telekom and Liberty Broadband 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 Broadband are associated (or correlated) with Deutsche Telekom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deutsche Telekom has no effect on the direction of Liberty Broadband i.e., Liberty Broadband and Deutsche Telekom go up and down completely randomly.

Pair Corralation between Liberty Broadband and Deutsche Telekom

Assuming the 90 days horizon Liberty Broadband is expected to generate 2.97 times more return on investment than Deutsche Telekom. However, Liberty Broadband is 2.97 times more volatile than Deutsche Telekom AG. It trades about 0.06 of its potential returns per unit of risk. Deutsche Telekom AG is currently generating about 0.16 per unit of risk. If you would invest  6,700  in Liberty Broadband on September 24, 2024 and sell it today you would earn a total of  650.00  from holding Liberty Broadband or generate 9.7% return on investment over 90 days.

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

Liberty Broadband  vs.  Deutsche Telekom AG

Liberty Broadband

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Broadband are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Liberty Broadband may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Deutsche Telekom

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Deutsche Telekom AG are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Deutsche Telekom may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Liberty Broadband and Deutsche Telekom

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

The idea behind Liberty Broadband and Deutsche Telekom AG 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .