Correlation Between AUTO TRADER and Charter Communications
Can any of the company-specific risk be diversified away by investing in both AUTO TRADER and Charter Communications 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 AUTO TRADER and Charter Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AUTO TRADER ADR and Charter Communications, you can compare the effects of market volatilities on AUTO TRADER and Charter Communications 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 AUTO TRADER with a short position of Charter Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of AUTO TRADER and Charter Communications.
Diversification Opportunities for AUTO TRADER and Charter Communications
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between AUTO and Charter is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding AUTO TRADER ADR and Charter Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Charter Communications and AUTO TRADER 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 AUTO TRADER ADR are associated (or correlated) with Charter Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Charter Communications has no effect on the direction of AUTO TRADER i.e., AUTO TRADER and Charter Communications go up and down completely randomly.
Pair Corralation between AUTO TRADER and Charter Communications
Assuming the 90 days trading horizon AUTO TRADER ADR is expected to under-perform the Charter Communications. But the stock apears to be less risky and, when comparing its historical volatility, AUTO TRADER ADR is 1.19 times less risky than Charter Communications. The stock trades about -0.33 of its potential returns per unit of risk. The Charter Communications is currently generating about -0.28 of returns per unit of risk over similar time horizon. If you would invest 35,945 in Charter Communications on October 16, 2024 and sell it today you would lose (2,570) from holding Charter Communications or give up 7.15% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
AUTO TRADER ADR vs. Charter Communications
Performance |
| Timeline |
| AUTO TRADER ADR |
| Charter Communications |
AUTO TRADER and Charter Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AUTO TRADER and Charter Communications
The main advantage of trading using opposite AUTO TRADER and Charter Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AUTO TRADER position performs unexpectedly, Charter Communications 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 Charter Communications will offset losses from the drop in Charter Communications' long position.| AUTO TRADER vs. Easy Software AG | AUTO TRADER vs. VARIOUS EATERIES LS | AUTO TRADER vs. Highlight Communications AG | AUTO TRADER vs. Darden Restaurants |
| Charter Communications vs. SALESFORCE INC CDR | Charter Communications vs. X FAB Silicon Foundries | Charter Communications vs. X FAB Silicon Foundries | Charter Communications vs. AUTO TRADER ADR |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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