Correlation Between Charter Communications and Enbridge

Can any of the company-specific risk be diversified away by investing in both Charter Communications and Enbridge 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 Enbridge 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 Enbridge, you can compare the effects of market volatilities on Charter Communications and Enbridge 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 Enbridge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Charter Communications and Enbridge.

Diversification Opportunities for Charter Communications and Enbridge

0.76

Correlation Coefficient

Charter Communications  Enbridge

Poor diversification

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

Pair Corralation between Charter Communications and Enbridge

Assuming the 90 days trading horizon Charter Communications Cl is expected to under-perform the Enbridge. In addition to that, Charter Communications is 2.14 times more volatile than Enbridge. It trades about -0.2 of its total potential returns per unit of risk. Enbridge is currently generating about -0.07 per unit of volatility. If you would invest  5,978  in Enbridge on September 24, 2024 and sell it today you would lose (65.00) from holding Enbridge or give up 1.09% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	68.18%
Values	Daily Returns

Charter Communications Cl  vs.  Enbridge

Charter Communications

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Charter Communications Cl are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Charter Communications may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Enbridge

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Enbridge are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Enbridge may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Charter Communications and Enbridge

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

The idea behind Charter Communications Cl and Enbridge 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.

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.