Correlation Between Liberty Broadband and Frontier Communications

Can any of the company-specific risk be diversified away by investing in both Liberty Broadband and Frontier Communications 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 Frontier Communications 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 Frontier Communications Parent, you can compare the effects of market volatilities on Liberty Broadband and Frontier Communications 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 Frontier Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Liberty Broadband and Frontier Communications.

Diversification Opportunities for Liberty Broadband and Frontier Communications

-0.03

Correlation Coefficient

Liberty Broadband  Frontier Communications

Good diversification

The 3 months correlation between Liberty and Frontier is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Liberty Broadband Srs and Frontier Communications Parent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frontier Communications 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 Frontier Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Frontier Communications has no effect on the direction of Liberty Broadband i.e., Liberty Broadband and Frontier Communications go up and down completely randomly.

Pair Corralation between Liberty Broadband and Frontier Communications

Assuming the 90 days horizon Liberty Broadband Srs is expected to generate 5.82 times more return on investment than Frontier Communications. However, Liberty Broadband is 5.82 times more volatile than Frontier Communications Parent. It trades about 0.15 of its potential returns per unit of risk. Frontier Communications Parent is currently generating about -0.03 per unit of risk. If you would invest  6,017  in Liberty Broadband Srs on September 5, 2024 and sell it today you would earn a total of  2,516  from holding Liberty Broadband Srs or generate 41.81% return on investment over 90 days.

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

Liberty Broadband Srs  vs.  Frontier Communications Parent

Liberty Broadband Srs

Risk-Adjusted Performance

11 of 100

Good

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

Frontier Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Frontier Communications Parent has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental drivers, Frontier Communications is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Liberty Broadband and Frontier Communications

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

The idea behind Liberty Broadband Srs and Frontier Communications Parent 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.