Correlation Between Charter Communications and American Airlines
Can any of the company-specific risk be diversified away by investing in both Charter Communications and American Airlines 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 Airlines 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 Airlines Group, you can compare the effects of market volatilities on Charter Communications and American Airlines 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 Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Charter Communications and American Airlines.
Diversification Opportunities for Charter Communications and American Airlines
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Charter and American is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Charter Communications and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines 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 Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Airlines has no effect on the direction of Charter Communications i.e., Charter Communications and American Airlines go up and down completely randomly.
Pair Corralation between Charter Communications and American Airlines
Assuming the 90 days trading horizon Charter Communications is expected to generate 1.05 times less return on investment than American Airlines. In addition to that, Charter Communications is 1.15 times more volatile than American Airlines Group. It trades about 0.2 of its total potential returns per unit of risk. American Airlines Group is currently generating about 0.24 per unit of volatility. If you would invest 1,065 in American Airlines Group on September 5, 2024 and sell it today you would earn a total of 339.00 from holding American Airlines Group or generate 31.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Charter Communications vs. American Airlines Group
Performance |
| Timeline |
| Charter Communications |
| American Airlines |
Charter Communications and American Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Charter Communications and American Airlines
The main advantage of trading using opposite Charter Communications and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Charter Communications position performs unexpectedly, American Airlines 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 Airlines will offset losses from the drop in American Airlines' long position.| Charter Communications vs. Apple Inc | Charter Communications vs. Apple Inc | Charter Communications vs. Apple Inc | Charter Communications vs. Apple Inc |
| American Airlines vs. Hemisphere Energy Corp | American Airlines vs. United Internet AG | American Airlines vs. Computer And Technologies | American Airlines vs. Charter Communications |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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