Correlation Between Charter Communications and American Public
Can any of the company-specific risk be diversified away by investing in both Charter Communications and American Public 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 American Public into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Charter Communications and American Public Education, you can compare the effects of market volatilities on Charter Communications and American Public 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 American Public. Check out your portfolio center. Please also check ongoing floating volatility patterns of Charter Communications and American Public.
Diversification Opportunities for Charter Communications and American Public
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Charter and American is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Charter Communications and American Public Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Public Education 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 American Public. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Public Education has no effect on the direction of Charter Communications i.e., Charter Communications and American Public go up and down completely randomly.
Pair Corralation between Charter Communications and American Public
Assuming the 90 days trading horizon Charter Communications is expected to generate 0.67 times more return on investment than American Public. However, Charter Communications is 1.49 times less risky than American Public. It trades about -0.23 of its potential returns per unit of risk. American Public Education is currently generating about -0.23 per unit of risk. If you would invest 35,945 in Charter Communications on October 17, 2024 and sell it today you would lose (2,270) from holding Charter Communications or give up 6.32% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Charter Communications vs. American Public Education
Performance |
| Timeline |
| Charter Communications |
| American Public Education |
Charter Communications and American Public Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Charter Communications and American Public
The main advantage of trading using opposite Charter Communications and American Public positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Charter Communications position performs unexpectedly, American Public 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 American Public will offset losses from the drop in American Public's long position.The idea behind Charter Communications and American Public Education 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.
| American Public vs. Charter Communications | American Public vs. Ribbon Communications | American Public vs. Pure Storage | American Public vs. CITIC Telecom International |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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