Correlation Between Liberty Latin and Clear Channel

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

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

Diversification Opportunities for Liberty Latin and Clear Channel

-0.6

Correlation Coefficient

Liberty Latin  Clear Channel

Excellent diversification

The 3 months correlation between Liberty and Clear is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Liberty Latin America and Clear Channel Outdoor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clear Channel Outdoor and Liberty Latin 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 Latin America are associated (or correlated) with Clear Channel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clear Channel Outdoor has no effect on the direction of Liberty Latin i.e., Liberty Latin and Clear Channel go up and down completely randomly.

Pair Corralation between Liberty Latin and Clear Channel

Assuming the 90 days horizon Liberty Latin America is expected to generate 0.85 times more return on investment than Clear Channel. However, Liberty Latin America is 1.17 times less risky than Clear Channel. It trades about 0.24 of its potential returns per unit of risk. Clear Channel Outdoor is currently generating about -0.1 per unit of risk. If you would invest  652.00  in Liberty Latin America on March 3, 2024 and sell it today you would earn a total of  255.00  from holding Liberty Latin America or generate 39.11% return on investment over 90 days.

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

Liberty Latin America  vs.  Clear Channel Outdoor

Liberty Latin America

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Latin America are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Liberty Latin disclosed solid returns over the last few months and may actually be approaching a breakup point.

Clear Channel Outdoor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Clear Channel Outdoor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in July 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Liberty Latin and Clear Channel

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

The idea behind Liberty Latin America and Clear Channel Outdoor 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.