Correlation Between Bread Financial and Charter Communications
Can any of the company-specific risk be diversified away by investing in both Bread Financial 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 Bread Financial and Charter Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bread Financial Holdings and Charter Communications, you can compare the effects of market volatilities on Bread Financial 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 Bread Financial with a short position of Charter Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bread Financial and Charter Communications.
Diversification Opportunities for Bread Financial and Charter Communications
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Bread and Charter is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Bread Financial Holdings and Charter Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Charter Communications and Bread Financial 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 Bread Financial Holdings 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 Bread Financial i.e., Bread Financial and Charter Communications go up and down completely randomly.
Pair Corralation between Bread Financial and Charter Communications
Assuming the 90 days trading horizon Bread Financial Holdings is expected to generate 1.21 times more return on investment than Charter Communications. However, Bread Financial is 1.21 times more volatile than Charter Communications. It trades about 0.2 of its potential returns per unit of risk. Charter Communications is currently generating about 0.23 per unit of risk. If you would invest 6,363 in Bread Financial Holdings on August 27, 2024 and sell it today you would earn a total of 1,973 from holding Bread Financial Holdings or generate 31.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bread Financial Holdings vs. Charter Communications
Performance |
| Timeline |
| Bread Financial Holdings |
| Charter Communications |
Bread Financial and Charter Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bread Financial and Charter Communications
The main advantage of trading using opposite Bread Financial and Charter Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bread Financial 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.| Bread Financial vs. Capital One Financial | Bread Financial vs. Fras le SA | Bread Financial vs. Clave Indices De | Bread Financial vs. BTG Pactual Logstica |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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