Correlation Between Liberty Media and Disney

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

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

Diversification Opportunities for Liberty Media and Disney

0.36

Correlation Coefficient

Liberty Media  Disney

Weak diversification

The 3 months correlation between Liberty and Disney is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Liberty Media and Walt Disney in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walt Disney and Liberty Media 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 Media are associated (or correlated) with Disney. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walt Disney has no effect on the direction of Liberty Media i.e., Liberty Media and Disney go up and down completely randomly.

Pair Corralation between Liberty Media and Disney

Assuming the 90 days horizon Liberty Media is expected to generate 0.93 times more return on investment than Disney. However, Liberty Media is 1.08 times less risky than Disney. It trades about 0.01 of its potential returns per unit of risk. Walt Disney is currently generating about -0.11 per unit of risk. If you would invest  6,802  in Liberty Media on January 20, 2024 and sell it today you would earn a total of  8.00  from holding Liberty Media or generate 0.12% return on investment over 90 days.

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

Liberty Media  vs.  Walt Disney

Liberty Media

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Media are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain basic indicators, Liberty Media may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Walt Disney

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Walt Disney are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward indicators, Disney unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Liberty Media and Disney

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

The idea behind Liberty Media and Walt Disney 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.