Correlation Between GE Aerospace and Liberty Broadband

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

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

Diversification Opportunities for GE Aerospace and Liberty Broadband

-0.91

Correlation Coefficient

GE Aerospace  Liberty Broadband

Pay attention - limited upside

The 3 months correlation between GE Aerospace and Liberty is -0.91. Overlapping area represents the amount of risk that can be diversified away by holding GE Aerospace and Liberty Broadband in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Broadband and GE Aerospace 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 GE Aerospace 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 GE Aerospace i.e., GE Aerospace and Liberty Broadband go up and down completely randomly.

Pair Corralation between GE Aerospace and Liberty Broadband

Allowing for the 90-day total investment horizon GE Aerospace is expected to generate 3.18 times less return on investment than Liberty Broadband. But when comparing it to its historical volatility, GE Aerospace is 4.37 times less risky than Liberty Broadband. It trades about 0.25 of its potential returns per unit of risk. Liberty Broadband is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  5,503  in Liberty Broadband on January 30, 2024 and sell it today you would earn a total of  2,544  from holding Liberty Broadband or generate 46.23% return on investment over 90 days.

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

GE Aerospace  vs.  Liberty Broadband

GE Aerospace

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in GE Aerospace are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal technical and fundamental indicators, GE Aerospace exhibited solid returns over the last few months and may actually be approaching a breakup point.

Liberty Broadband

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Broadband are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Liberty Broadband sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GE Aerospace and Liberty Broadband

The main advantage of trading using opposite GE Aerospace and Liberty Broadband positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GE Aerospace 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 GE Aerospace 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.