Correlation Between Roku and Charter Communications
Can any of the company-specific risk be diversified away by investing in both Roku and Charter 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 Roku and Charter Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Roku Inc and Charter Communications, you can compare the effects of market volatilities on Roku and Charter 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 Roku with a short position of Charter Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Roku and Charter Communications.
Diversification Opportunities for Roku and Charter Communications
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Roku and Charter is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Roku Inc and Charter Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Charter Communications and Roku 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 Roku Inc are associated (or correlated) with Charter Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Charter Communications has no effect on the direction of Roku i.e., Roku and Charter Communications go up and down completely randomly.
Pair Corralation between Roku and Charter Communications
Assuming the 90 days trading horizon Roku is expected to generate 1.37 times less return on investment than Charter Communications. In addition to that, Roku is 1.21 times more volatile than Charter Communications. It trades about 0.09 of its total potential returns per unit of risk. Charter Communications is currently generating about 0.15 per unit of volatility. If you would invest 2,492 in Charter Communications on September 1, 2024 and sell it today you would earn a total of 1,490 from holding Charter Communications or generate 59.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.22% |
| Values | Daily Returns |
Roku Inc vs. Charter Communications
Performance |
| Timeline |
| Roku Inc |
| Charter Communications |
Roku and Charter Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Roku and Charter Communications
The main advantage of trading using opposite Roku and Charter Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Roku position performs unexpectedly, Charter 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 Charter Communications will offset losses from the drop in Charter Communications' long position.The idea behind Roku Inc and Charter Communications 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.| Charter Communications vs. Intelbras SA | Charter Communications vs. Neogrid Participaes SA | Charter Communications vs. Mliuz SA | Charter Communications vs. Locaweb Servios de |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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