Correlation Between Liberty Broadband and Orange SA

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

By analyzing existing cross correlation between Liberty Broadband Srs and Orange SA, you can compare the effects of market volatilities on Liberty Broadband and Orange SA 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 Orange SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Liberty Broadband and Orange SA.

Diversification Opportunities for Liberty Broadband and Orange SA

-0.59

Correlation Coefficient

Liberty Broadband  Orange SA

Excellent diversification

The 3 months correlation between Liberty and Orange is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Liberty Broadband Srs and Orange SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orange SA 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 Srs are associated (or correlated) with Orange SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orange SA has no effect on the direction of Liberty Broadband i.e., Liberty Broadband and Orange SA go up and down completely randomly.

Pair Corralation between Liberty Broadband and Orange SA

Assuming the 90 days horizon Liberty Broadband Srs is expected to generate 1.09 times more return on investment than Orange SA. However, Liberty Broadband is 1.09 times more volatile than Orange SA. It trades about 0.12 of its potential returns per unit of risk. Orange SA is currently generating about -0.02 per unit of risk. If you would invest  6,009  in Liberty Broadband Srs on September 13, 2024 and sell it today you would earn a total of  2,023  from holding Liberty Broadband Srs or generate 33.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Liberty Broadband Srs  vs.  Orange SA

Liberty Broadband Srs

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Broadband Srs are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain fundamental indicators, Liberty Broadband sustained solid returns over the last few months and may actually be approaching a breakup point.

Orange SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Orange SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Orange SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Liberty Broadband and Orange SA

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

The idea behind Liberty Broadband Srs and Orange SA 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.