Correlation Between Reading International and Liberty Media

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

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

Diversification Opportunities for Reading International and Liberty Media

-0.68

Correlation Coefficient

Reading International  Liberty Media

Excellent diversification

The 3 months correlation between Reading and Liberty is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Reading International B and Liberty Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Media and Reading International 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 Reading International B are associated (or correlated) with Liberty Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liberty Media has no effect on the direction of Reading International i.e., Reading International and Liberty Media go up and down completely randomly.

Pair Corralation between Reading International and Liberty Media

Given the investment horizon of 90 days Reading International B is expected to under-perform the Liberty Media. In addition to that, Reading International is 3.87 times more volatile than Liberty Media. It trades about -0.06 of its total potential returns per unit of risk. Liberty Media is currently generating about 0.16 per unit of volatility. If you would invest  6,974  in Liberty Media on September 2, 2024 and sell it today you would earn a total of  1,116  from holding Liberty Media or generate 16.0% return on investment over 90 days.

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

Reading International B  vs.  Liberty Media

Reading International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Reading International B has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Liberty Media

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Media are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Liberty Media sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Reading International and Liberty Media

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

The idea behind Reading International B and Liberty Media 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.

Check out your portfolio center.

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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.