Correlation Between Charter Communications and China Communications
Can any of the company-specific risk be diversified away by investing in both Charter Communications and China Communications 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 China Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Charter Communications and China Communications Services, you can compare the effects of market volatilities on Charter Communications and China Communications 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 China Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Charter Communications and China Communications.
Diversification Opportunities for Charter Communications and China Communications
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Charter and China is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Charter Communications and China Communications Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China 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 China Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Communications has no effect on the direction of Charter Communications i.e., Charter Communications and China Communications go up and down completely randomly.
Pair Corralation between Charter Communications and China Communications
Assuming the 90 days trading horizon Charter Communications is expected to under-perform the China Communications. In addition to that, Charter Communications is 1.76 times more volatile than China Communications Services. It trades about -0.03 of its total potential returns per unit of risk. China Communications Services is currently generating about 0.2 per unit of volatility. If you would invest 48.00 in China Communications Services on September 12, 2024 and sell it today you would earn a total of 3.00 from holding China Communications Services or generate 6.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Charter Communications vs. China Communications Services
Performance |
| Timeline |
| Charter Communications |
| China Communications |
Charter Communications and China Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Charter Communications and China Communications
The main advantage of trading using opposite Charter Communications and China Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Charter Communications position performs unexpectedly, China Communications 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 China Communications will offset losses from the drop in China Communications' long position.| Charter Communications vs. Apple Inc | Charter Communications vs. Apple Inc | Charter Communications vs. Apple Inc | Charter Communications vs. Apple Inc |
| China Communications vs. Superior Plus Corp | China Communications vs. SIVERS SEMICONDUCTORS AB | China Communications vs. Norsk Hydro ASA | China Communications vs. Reliance Steel Aluminum |
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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