Correlation Between Liberty Media and Cinemark Holdings

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

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

Diversification Opportunities for Liberty Media and Cinemark Holdings

0.09

Correlation Coefficient

Liberty Media  Cinemark Holdings

Significant diversification

The 3 months correlation between Liberty and Cinemark is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Liberty Media and Cinemark Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cinemark Holdings 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 Cinemark Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cinemark Holdings has no effect on the direction of Liberty Media i.e., Liberty Media and Cinemark Holdings go up and down completely randomly.

Pair Corralation between Liberty Media and Cinemark Holdings

Assuming the 90 days horizon Liberty Media is expected to generate 0.93 times more return on investment than Cinemark Holdings. However, Liberty Media is 1.07 times less risky than Cinemark Holdings. It trades about 0.08 of its potential returns per unit of risk. Cinemark Holdings is currently generating about -0.26 per unit of risk. If you would invest  6,156  in Liberty Media on February 6, 2024 and sell it today you would earn a total of  133.00  from holding Liberty Media or generate 2.16% return on investment over 90 days.

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

Liberty Media  vs.  Cinemark Holdings

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 somewhat weak basic indicators, Liberty Media may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Cinemark Holdings

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cinemark Holdings are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Cinemark Holdings disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Liberty Media and Cinemark Holdings

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

The idea behind Liberty Media and Cinemark Holdings 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.