Correlation Between Charter Communications and Universal Display

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

Diversification Opportunities for Charter Communications and Universal Display

-0.58

Correlation Coefficient

Charter Communications  Universal Display

Excellent diversification

The 3 months correlation between Charter and Universal is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Charter Communications Cl and Universal Display Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Display 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 Universal Display. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Display Corp has no effect on the direction of Charter Communications i.e., Charter Communications and Universal Display go up and down completely randomly.

Pair Corralation between Charter Communications and Universal Display

Assuming the 90 days trading horizon Charter Communications Cl is expected to under-perform the Universal Display. But the stock apears to be less risky and, when comparing its historical volatility, Charter Communications Cl is 1.36 times less risky than Universal Display. The stock trades about -0.21 of its potential returns per unit of risk. The Universal Display Corp is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest  15,854  in Universal Display Corp on October 8, 2024 and sell it today you would lose (717.00) from holding Universal Display Corp or give up 4.52% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	89.47%
Values	Daily Returns

Charter Communications Cl  vs.  Universal Display Corp

Charter Communications

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Charter Communications Cl are ranked lower than 5 (%) 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 February 2025.

Universal Display Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Universal Display Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Charter Communications and Universal Display

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

The idea behind Charter Communications Cl and Universal Display 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.