Correlation Between Charter Communications and Leidos Holdings
Can any of the company-specific risk be diversified away by investing in both Charter Communications and Leidos 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 Charter Communications and Leidos Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Charter Communications and Leidos Holdings, you can compare the effects of market volatilities on Charter Communications and Leidos 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 Charter Communications with a short position of Leidos Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Charter Communications and Leidos Holdings.
Diversification Opportunities for Charter Communications and Leidos Holdings
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Charter and Leidos is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Charter Communications and Leidos Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leidos Holdings 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 Leidos Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leidos Holdings has no effect on the direction of Charter Communications i.e., Charter Communications and Leidos Holdings go up and down completely randomly.
Pair Corralation between Charter Communications and Leidos Holdings
Assuming the 90 days trading horizon Charter Communications is expected to generate 2.35 times less return on investment than Leidos Holdings. In addition to that, Charter Communications is 1.24 times more volatile than Leidos Holdings. It trades about 0.03 of its total potential returns per unit of risk. Leidos Holdings is currently generating about 0.07 per unit of volatility. If you would invest 5,491 in Leidos Holdings on August 30, 2024 and sell it today you would earn a total of 4,079 from holding Leidos Holdings or generate 74.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 88.76% |
| Values | Daily Returns |
Charter Communications vs. Leidos Holdings
Performance |
| Timeline |
| Charter Communications |
| Leidos Holdings |
Charter Communications and Leidos Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Charter Communications and Leidos Holdings
The main advantage of trading using opposite Charter Communications and Leidos Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Charter Communications position performs unexpectedly, Leidos 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 Leidos Holdings will offset losses from the drop in Leidos Holdings' long position.The idea behind Charter Communications and Leidos 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.| Leidos Holdings vs. Spotify Technology SA | Leidos Holdings vs. Cognizant Technology Solutions | Leidos Holdings vs. Charter Communications | Leidos Holdings vs. Take Two Interactive Software |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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