Correlation Between Exxon and Liberty Broadband
Can any of the company-specific risk be diversified away by investing in both Exxon 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 Exxon and Liberty Broadband into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Exxon Mobil Corp and Liberty Broadband Srs, you can compare the effects of market volatilities on Exxon 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 Exxon with a short position of Liberty Broadband. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exxon and Liberty Broadband.
Diversification Opportunities for Exxon and Liberty Broadband
-0.8 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Exxon and Liberty is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and Liberty Broadband Srs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Broadband Srs and Exxon 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 Exxon Mobil Corp 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 Srs has no effect on the direction of Exxon i.e., Exxon and Liberty Broadband go up and down completely randomly.
Pair Corralation between Exxon and Liberty Broadband
Considering the 90-day investment horizon Exxon Mobil Corp is expected to generate 0.45 times more return on investment than Liberty Broadband. However, Exxon Mobil Corp is 2.23 times less risky than Liberty Broadband. It trades about 0.33 of its potential returns per unit of risk. Liberty Broadband Srs is currently generating about -0.38 per unit of risk. If you would invest 11,299 in Exxon Mobil Corp on January 20, 2024 and sell it today you would earn a total of 689.00 from holding Exxon Mobil Corp or generate 6.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Exxon Mobil Corp vs. Liberty Broadband Srs
Performance |
| Timeline |
| Exxon Mobil Corp |
| Liberty Broadband Srs |
Exxon and Liberty Broadband Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Exxon and Liberty Broadband
The main advantage of trading using opposite Exxon and Liberty Broadband positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exxon 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 Exxon Mobil Corp and Liberty Broadband Srs 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.| Liberty Broadband vs. Liberty Global PLC | Liberty Broadband vs. Shenandoah Telecommunications Co | Liberty Broadband vs. Liberty Global PLC | Liberty Broadband vs. Liberty Latin America |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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