Correlation Between Charter Communications and Associated British

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

Diversification Opportunities for Charter Communications and Associated British

-0.42

Correlation Coefficient

Charter Communications  Associated British

Very good diversification

The 3 months correlation between Charter and Associated is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Charter Communications Cl and Associated British Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Associated British Foods 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 Associated British. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Associated British Foods has no effect on the direction of Charter Communications i.e., Charter Communications and Associated British go up and down completely randomly.

Pair Corralation between Charter Communications and Associated British

Assuming the 90 days trading horizon Charter Communications Cl is expected to under-perform the Associated British. In addition to that, Charter Communications is 1.7 times more volatile than Associated British Foods. It trades about 0.0 of its total potential returns per unit of risk. Associated British Foods is currently generating about 0.02 per unit of volatility. If you would invest  186,163  in Associated British Foods on September 29, 2024 and sell it today you would earn a total of  18,237  from holding Associated British Foods or generate 9.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.96%
Values	Daily Returns

Charter Communications Cl  vs.  Associated British Foods

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.

Associated British Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Associated British Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Charter Communications and Associated British

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

The idea behind Charter Communications Cl and Associated British Foods 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.