Correlation Between Charter Communications and BYD

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

Diversification Opportunities for Charter Communications and BYD

-0.03

Correlation Coefficient

Charter Communications  BYD

Good diversification

The 3 months correlation between Charter and BYD is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Charter Communications Cl and BYD Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BYD Co 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 BYD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BYD Co has no effect on the direction of Charter Communications i.e., Charter Communications and BYD go up and down completely randomly.

Pair Corralation between Charter Communications and BYD

Assuming the 90 days trading horizon Charter Communications Cl is expected to generate 0.47 times more return on investment than BYD. However, Charter Communications Cl is 2.14 times less risky than BYD. It trades about 0.06 of its potential returns per unit of risk. BYD Co is currently generating about 0.03 per unit of risk. If you would invest  33,106  in Charter Communications Cl on October 26, 2024 and sell it today you would earn a total of  2,530  from holding Charter Communications Cl or generate 7.64% return on investment over 90 days.

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

Charter Communications Cl  vs.  BYD Co

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 February 2025.

BYD Co

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BYD Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, BYD may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Charter Communications and BYD

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

The idea behind Charter Communications Cl and BYD Co 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.