Correlation Between Charter Communications and Air China
Can any of the company-specific risk be diversified away by investing in both Charter Communications and Air China 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 Air China into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Charter Communications and Air China Limited, you can compare the effects of market volatilities on Charter Communications and Air China 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 Air China. Check out your portfolio center. Please also check ongoing floating volatility patterns of Charter Communications and Air China.
Diversification Opportunities for Charter Communications and Air China
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Charter and Air is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Charter Communications and Air China Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air China Limited 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 Air China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air China Limited has no effect on the direction of Charter Communications i.e., Charter Communications and Air China go up and down completely randomly.
Pair Corralation between Charter Communications and Air China
Assuming the 90 days trading horizon Charter Communications is expected to generate 0.68 times more return on investment than Air China. However, Charter Communications is 1.47 times less risky than Air China. It trades about 0.11 of its potential returns per unit of risk. Air China Limited is currently generating about 0.06 per unit of risk. If you would invest 25,770 in Charter Communications on September 3, 2024 and sell it today you would earn a total of 11,305 from holding Charter Communications or generate 43.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Charter Communications vs. Air China Limited
Performance |
| Timeline |
| Charter Communications |
| Air China Limited |
Charter Communications and Air China Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Charter Communications and Air China
The main advantage of trading using opposite Charter Communications and Air China positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Charter Communications position performs unexpectedly, Air China 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 Air China will offset losses from the drop in Air China's long position.| Charter Communications vs. Playa Hotels Resorts | Charter Communications vs. NH HOTEL GROUP | Charter Communications vs. RYU Apparel | Charter Communications vs. Pebblebrook Hotel Trust |
| Air China vs. Entravision Communications | Air China vs. Hemisphere Energy Corp | Air China vs. Charter Communications | Air China vs. LION ONE METALS |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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