Correlation Between Charter Communications and Liberty Media

Can any of the company-specific risk be diversified away by investing in both Charter Communications and Liberty Media 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 Liberty Media into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Charter Communications Cl and Liberty Media Corp, you can compare the effects of market volatilities on Charter Communications and Liberty Media 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 Liberty Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of Charter Communications and Liberty Media.

Diversification Opportunities for Charter Communications and Liberty Media

0.76

Correlation Coefficient

Charter Communications  Liberty Media

Poor diversification

The 3 months correlation between Charter and Liberty is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Charter Communications Cl and Liberty Media Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Media Corp 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 Cl are associated (or correlated) with Liberty Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liberty Media Corp has no effect on the direction of Charter Communications i.e., Charter Communications and Liberty Media go up and down completely randomly.

Pair Corralation between Charter Communications and Liberty Media

Assuming the 90 days trading horizon Charter Communications is expected to generate 1.28 times less return on investment than Liberty Media. In addition to that, Charter Communications is 1.63 times more volatile than Liberty Media Corp. It trades about 0.08 of its total potential returns per unit of risk. Liberty Media Corp is currently generating about 0.17 per unit of volatility. If you would invest  6,981  in Liberty Media Corp on September 12, 2024 and sell it today you would earn a total of  1,252  from holding Liberty Media Corp or generate 17.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Charter Communications Cl  vs.  Liberty Media Corp

Charter Communications

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Charter Communications Cl are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Charter Communications unveiled solid returns over the last few months and may actually be approaching a breakup point.

Liberty Media Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Media Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Liberty Media unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Charter Communications and Liberty Media

The main advantage of trading using opposite Charter Communications and Liberty Media positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Charter Communications position performs unexpectedly, Liberty Media 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 Liberty Media will offset losses from the drop in Liberty Media's long position.

The idea behind Charter Communications Cl and Liberty Media Corp 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..