Correlation Between Charter Communications and Warner Music

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Can any of the company-specific risk be diversified away by investing in both Charter Communications and Warner Music 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 Warner Music into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Charter Communications and Warner Music Group, you can compare the effects of market volatilities on Charter Communications and Warner Music 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 Warner Music. Check out your portfolio center. Please also check ongoing floating volatility patterns of Charter Communications and Warner Music.

Diversification Opportunities for Charter Communications and Warner Music

CharterWarnerDiversified AwayCharterWarnerDiversified Away100%
0.08
  Correlation Coefficient

Significant diversification

The 3 months correlation between Charter and Warner is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Charter Communications and Warner Music Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Warner Music Group 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 Warner Music. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Warner Music Group has no effect on the direction of Charter Communications i.e., Charter Communications and Warner Music go up and down completely randomly.

Pair Corralation between Charter Communications and Warner Music

Assuming the 90 days trading horizon Charter Communications is expected to generate 17.49 times less return on investment than Warner Music. But when comparing it to its historical volatility, Charter Communications is 1.26 times less risky than Warner Music. It trades about 0.02 of its potential returns per unit of risk. Warner Music Group is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  3,000  in Warner Music Group on November 30, 2024 and sell it today you would earn a total of  308.00  from holding Warner Music Group or generate 10.27% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Charter Communications  vs.  Warner Music Group

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -10-50510
JavaScript chart by amCharts 3.21.15CQD WA4
       Timeline  
Charter Communications 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Charter Communications has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb330340350360370380
Warner Music Group 

Risk-Adjusted Performance

OK

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Warner Music Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Warner Music may actually be approaching a critical reversion point that can send shares even higher in March 2025.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb28293031323334

Charter Communications and Warner Music Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-3.04-2.28-1.51-0.75-0.01230.721.462.192.93 0.060.070.080.090.100.11
JavaScript chart by amCharts 3.21.15CQD WA4
       Returns  

Pair Trading with Charter Communications and Warner Music

The main advantage of trading using opposite Charter Communications and Warner Music positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Charter Communications position performs unexpectedly, Warner Music 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 Warner Music will offset losses from the drop in Warner Music's long position.
The idea behind Charter Communications and Warner Music Group pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Anywhere module to track or share privately all of your investments from the convenience of any device.

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