Correlation Between Charter Communications and Imperial Brands
Can any of the company-specific risk be diversified away by investing in both Charter Communications and Imperial Brands 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 Imperial Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Charter Communications and Imperial Brands PLC, you can compare the effects of market volatilities on Charter Communications and Imperial Brands 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 Imperial Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Charter Communications and Imperial Brands.
Diversification Opportunities for Charter Communications and Imperial Brands
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Charter and Imperial is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Charter Communications and Imperial Brands PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Imperial Brands PLC 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 Imperial Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Imperial Brands PLC has no effect on the direction of Charter Communications i.e., Charter Communications and Imperial Brands go up and down completely randomly.
Pair Corralation between Charter Communications and Imperial Brands
Assuming the 90 days trading horizon Charter Communications is expected to generate 1.03 times less return on investment than Imperial Brands. In addition to that, Charter Communications is 2.07 times more volatile than Imperial Brands PLC. It trades about 0.18 of its total potential returns per unit of risk. Imperial Brands PLC is currently generating about 0.39 per unit of volatility. If you would invest 2,754 in Imperial Brands PLC on September 5, 2024 and sell it today you would earn a total of 321.00 from holding Imperial Brands PLC or generate 11.66% 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. Imperial Brands PLC
Performance |
| Timeline |
| Charter Communications |
| Imperial Brands PLC |
Charter Communications and Imperial Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Charter Communications and Imperial Brands
The main advantage of trading using opposite Charter Communications and Imperial Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Charter Communications position performs unexpectedly, Imperial Brands 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 Imperial Brands will offset losses from the drop in Imperial Brands' long position.| Charter Communications vs. Apple Inc | Charter Communications vs. Apple Inc | Charter Communications vs. Apple Inc | Charter Communications vs. Apple Inc |
| Imperial Brands vs. INTERCONT HOTELS | Imperial Brands vs. Charter Communications | Imperial Brands vs. Pebblebrook Hotel Trust | Imperial Brands vs. SBA Communications Corp |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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