Correlation Between Charter Communications and Cable One
Can any of the company-specific risk be diversified away by investing in both Charter Communications and Cable One 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 Charter Communications and Cable One into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Charter Communications and Cable One, you can compare the effects of market volatilities on Charter Communications and Cable One 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 Charter Communications with a short position of Cable One. Check out your portfolio center. Please also check ongoing floating volatility patterns of Charter Communications and Cable One.
Diversification Opportunities for Charter Communications and Cable One
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Charter and Cable is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Charter Communications and Cable One in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cable One and Charter Communications 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 Charter Communications are associated (or correlated) with Cable One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cable One has no effect on the direction of Charter Communications i.e., Charter Communications and Cable One go up and down completely randomly.
Pair Corralation between Charter Communications and Cable One
Assuming the 90 days trading horizon Charter Communications is expected to generate 1.23 times less return on investment than Cable One. In addition to that, Charter Communications is 1.78 times more volatile than Cable One. It trades about 0.24 of its total potential returns per unit of risk. Cable One is currently generating about 0.52 per unit of volatility. If you would invest 986.00 in Cable One on August 27, 2024 and sell it today you would earn a total of 238.00 from holding Cable One or generate 24.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Charter Communications vs. Cable One
Performance |
| Timeline |
| Charter Communications |
| Cable One |
Charter Communications and Cable One Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Charter Communications and Cable One
The main advantage of trading using opposite Charter Communications and Cable One positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Charter Communications position performs unexpectedly, Cable One 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 Cable One will offset losses from the drop in Cable One's long position.The idea behind Charter Communications and Cable One 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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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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