Correlation Between Charter Communications and Olympic Steel
Can any of the company-specific risk be diversified away by investing in both Charter Communications and Olympic Steel 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 Olympic Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Charter Communications and Olympic Steel, you can compare the effects of market volatilities on Charter Communications and Olympic Steel 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 Olympic Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Charter Communications and Olympic Steel.
Diversification Opportunities for Charter Communications and Olympic Steel
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Charter and Olympic is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Charter Communications and Olympic Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Olympic Steel 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 Olympic Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Olympic Steel has no effect on the direction of Charter Communications i.e., Charter Communications and Olympic Steel go up and down completely randomly.
Pair Corralation between Charter Communications and Olympic Steel
Assuming the 90 days trading horizon Charter Communications is expected to generate 0.62 times more return on investment than Olympic Steel. However, Charter Communications is 1.61 times less risky than Olympic Steel. It trades about -0.16 of its potential returns per unit of risk. Olympic Steel is currently generating about -0.27 per unit of risk. If you would invest 35,355 in Charter Communications on October 18, 2024 and sell it today you would lose (1,520) from holding Charter Communications or give up 4.3% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Charter Communications vs. Olympic Steel
Performance |
| Timeline |
| Charter Communications |
| Olympic Steel |
Charter Communications and Olympic Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Charter Communications and Olympic Steel
The main advantage of trading using opposite Charter Communications and Olympic Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Charter Communications position performs unexpectedly, Olympic Steel 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 Olympic Steel will offset losses from the drop in Olympic Steel's long position.| Charter Communications vs. NORTHEAST UTILITIES | Charter Communications vs. Canadian Utilities Limited | Charter Communications vs. Nexstar Media Group | Charter Communications vs. Diamyd Medical AB |
| Olympic Steel vs. Chunghwa Telecom Co | Olympic Steel vs. Canon Marketing Japan | Olympic Steel vs. TRADELINK ELECTRON | Olympic Steel 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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