Correlation Between Charter Communications and Cairo Communication

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

Diversification Opportunities for Charter Communications and Cairo Communication

-0.32

Correlation Coefficient

Charter Communications  Cairo Communication

Very good diversification

The 3 months correlation between Charter and Cairo is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Charter Communications Cl and Cairo Communication SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cairo Communication SpA 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 Cairo Communication. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cairo Communication SpA has no effect on the direction of Charter Communications i.e., Charter Communications and Cairo Communication go up and down completely randomly.

Pair Corralation between Charter Communications and Cairo Communication

Assuming the 90 days trading horizon Charter Communications Cl is expected to under-perform the Cairo Communication. In addition to that, Charter Communications is 1.38 times more volatile than Cairo Communication SpA. It trades about -0.04 of its total potential returns per unit of risk. Cairo Communication SpA is currently generating about 0.22 per unit of volatility. If you would invest  232.00  in Cairo Communication SpA on November 27, 2024 and sell it today you would earn a total of  52.00  from holding Cairo Communication SpA or generate 22.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Charter Communications Cl  vs.  Cairo Communication SpA

Charter Communications

Risk-Adjusted Performance

Very Weak

Over the last 90 days Charter Communications Cl has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Charter Communications is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Cairo Communication SpA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cairo Communication SpA are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Cairo Communication unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Charter Communications and Cairo Communication

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

The idea behind Charter Communications Cl and Cairo Communication SpA 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.