Correlation Between Liberty Media and Nexstar Broadcasting

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

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

Diversification Opportunities for Liberty Media and Nexstar Broadcasting

0.5

Correlation Coefficient

Liberty Media  Nexstar Broadcasting

Very weak diversification

The 3 months correlation between Liberty and Nexstar is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Liberty Media and Nexstar Broadcasting Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nexstar Broadcasting 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 Nexstar Broadcasting. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nexstar Broadcasting has no effect on the direction of Liberty Media i.e., Liberty Media and Nexstar Broadcasting go up and down completely randomly.

Pair Corralation between Liberty Media and Nexstar Broadcasting

Assuming the 90 days horizon Liberty Media is expected to generate 0.68 times more return on investment than Nexstar Broadcasting. However, Liberty Media is 1.48 times less risky than Nexstar Broadcasting. It trades about 0.21 of its potential returns per unit of risk. Nexstar Broadcasting Group is currently generating about -0.03 per unit of risk. If you would invest  8,066  in Liberty Media on August 31, 2024 and sell it today you would earn a total of  807.00  from holding Liberty Media or generate 10.0% return on investment over 90 days.

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

Liberty Media  vs.  Nexstar Broadcasting Group

Liberty Media

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Media are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain basic indicators, Liberty Media disclosed solid returns over the last few months and may actually be approaching a breakup point.

Nexstar Broadcasting

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nexstar Broadcasting Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Nexstar Broadcasting is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Liberty Media and Nexstar Broadcasting

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

The idea behind Liberty Media and Nexstar Broadcasting Group 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.