Correlation Between Charter Communications and PT Steel
Can any of the company-specific risk be diversified away by investing in both Charter Communications and PT 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 PT 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 PT Steel Pipe, you can compare the effects of market volatilities on Charter Communications and PT 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 PT Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Charter Communications and PT Steel.
Diversification Opportunities for Charter Communications and PT Steel
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Charter and S08 is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Charter Communications and PT Steel Pipe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Steel Pipe 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 PT Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Steel Pipe has no effect on the direction of Charter Communications i.e., Charter Communications and PT Steel go up and down completely randomly.
Pair Corralation between Charter Communications and PT Steel
Assuming the 90 days trading horizon Charter Communications is expected to under-perform the PT Steel. But the stock apears to be less risky and, when comparing its historical volatility, Charter Communications is 4.93 times less risky than PT Steel. The stock trades about -0.21 of its potential returns per unit of risk. The PT Steel Pipe is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 1.25 in PT Steel Pipe on October 12, 2024 and sell it today you would lose (0.10) from holding PT Steel Pipe or give up 8.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Charter Communications vs. PT Steel Pipe
Performance |
| Timeline |
| Charter Communications |
| PT Steel Pipe |
Charter Communications and PT Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Charter Communications and PT Steel
The main advantage of trading using opposite Charter Communications and PT Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Charter Communications position performs unexpectedly, PT 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 PT Steel will offset losses from the drop in PT Steel's long position.| Charter Communications vs. HANOVER INSURANCE | Charter Communications vs. Air New Zealand | Charter Communications vs. Wizz Air Holdings | Charter Communications vs. RYANAIR HLDGS ADR |
| PT Steel vs. MARKET VECTR RETAIL | PT Steel vs. FLOW TRADERS LTD | PT Steel vs. Zoom Video Communications | PT 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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