Correlation Between Visa and Liberty Media

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

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

Diversification Opportunities for Visa and Liberty Media

0.77

Correlation Coefficient

Visa  Liberty Media

Poor diversification

The 3 months correlation between Visa and Liberty is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Liberty Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Media and Visa 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 Visa Class A 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 Visa i.e., Visa and Liberty Media go up and down completely randomly.

Pair Corralation between Visa and Liberty Media

Taking into account the 90-day investment horizon Visa is expected to generate 4.87 times less return on investment than Liberty Media. But when comparing it to its historical volatility, Visa Class A is 1.6 times less risky than Liberty Media. It trades about 0.16 of its potential returns per unit of risk. Liberty Media is currently generating about 0.49 of returns per unit of risk over similar time horizon. If you would invest  3,928  in Liberty Media on September 2, 2024 and sell it today you would earn a total of  3,374  from holding Liberty Media or generate 85.9% return on investment over 90 days.

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

Visa Class A  vs.  Liberty Media

Visa Class A

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Visa showed solid returns over the last few months and may actually be approaching a breakup point.

Liberty Media

Risk-Adjusted Performance

38 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Media are ranked lower than 38 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile basic indicators, Liberty Media disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visa and Liberty Media

The main advantage of trading using opposite Visa and Liberty Media positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa 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 Visa Class A 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.

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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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.