Correlation Between BANDAI NAMCO and Liberty Broadband

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

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

Diversification Opportunities for BANDAI NAMCO and Liberty Broadband

0.77

Correlation Coefficient

BANDAI NAMCO  Liberty Broadband

Poor diversification

The 3 months correlation between BANDAI and Liberty is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding BANDAI NAMCO Holdings and Liberty Broadband in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Broadband and BANDAI NAMCO 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 BANDAI NAMCO Holdings are associated (or correlated) with Liberty Broadband. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liberty Broadband has no effect on the direction of BANDAI NAMCO i.e., BANDAI NAMCO and Liberty Broadband go up and down completely randomly.

Pair Corralation between BANDAI NAMCO and Liberty Broadband

Assuming the 90 days horizon BANDAI NAMCO Holdings is expected to generate 1.21 times more return on investment than Liberty Broadband. However, BANDAI NAMCO is 1.21 times more volatile than Liberty Broadband. It trades about 0.02 of its potential returns per unit of risk. Liberty Broadband is currently generating about -0.29 per unit of risk. If you would invest  2,025  in BANDAI NAMCO Holdings on September 12, 2024 and sell it today you would earn a total of  6.00  from holding BANDAI NAMCO Holdings or generate 0.3% return on investment over 90 days.

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

BANDAI NAMCO Holdings  vs.  Liberty Broadband

BANDAI NAMCO Holdings

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BANDAI NAMCO Holdings are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, BANDAI NAMCO reported solid returns over the last few months and may actually be approaching a breakup point.

Liberty Broadband

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Broadband are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Liberty Broadband reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BANDAI NAMCO and Liberty Broadband

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

The idea behind BANDAI NAMCO Holdings and Liberty Broadband 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.