Correlation Between Charter Communications and Bank of America
Can any of the company-specific risk be diversified away by investing in both Charter Communications and Bank of America 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 Bank of America into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Charter Communications and Verizon Communications, you can compare the effects of market volatilities on Charter Communications and Bank of America 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 Bank of America. Check out your portfolio center. Please also check ongoing floating volatility patterns of Charter Communications and Bank of America.
Diversification Opportunities for Charter Communications and Bank of America
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Charter and Bank is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Charter Communications and Verizon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verizon Communications 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 Bank of America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Verizon Communications has no effect on the direction of Charter Communications i.e., Charter Communications and Bank of America go up and down completely randomly.
Pair Corralation between Charter Communications and Bank of America
Assuming the 90 days trading horizon Charter Communications is expected to generate 3.37 times more return on investment than Bank of America. However, Charter Communications is 3.37 times more volatile than Verizon Communications. It trades about 0.24 of its potential returns per unit of risk. Verizon Communications is currently generating about 0.35 per unit of risk. If you would invest 30,170 in Charter Communications on August 30, 2024 and sell it today you would earn a total of 6,955 from holding Charter Communications or generate 23.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Charter Communications vs. Verizon Communications
Performance |
| Timeline |
| Charter Communications |
| Verizon Communications |
Charter Communications and Bank of America Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Charter Communications and Bank of America
The main advantage of trading using opposite Charter Communications and Bank of America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Charter Communications position performs unexpectedly, Bank of America 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 Bank of America will offset losses from the drop in Bank of America's long position.| Charter Communications vs. Unity Software | Charter Communications vs. Mitsui Chemicals | Charter Communications vs. FORMPIPE SOFTWARE AB | Charter Communications vs. HYATT HOTELS A |
| Bank of America vs. Apple Inc | Bank of America vs. Apple Inc | Bank of America vs. Superior Plus Corp | Bank of America vs. SIVERS SEMICONDUCTORS AB |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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