Correlation Between Charter Communications and Light Science

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

Diversification Opportunities for Charter Communications and Light Science

0.42

Correlation Coefficient

Charter Communications  Light Science

Very weak diversification

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

Pair Corralation between Charter Communications and Light Science

Assuming the 90 days trading horizon Charter Communications is expected to generate 3.07 times less return on investment than Light Science. But when comparing it to its historical volatility, Charter Communications Cl is 2.53 times less risky than Light Science. It trades about 0.04 of its potential returns per unit of risk. Light Science Technologies is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  270.00  in Light Science Technologies on December 24, 2024 and sell it today you would earn a total of  20.00  from holding Light Science Technologies or generate 7.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Charter Communications Cl  vs.  Light Science Technologies

Charter Communications

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Charter Communications Cl are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Charter Communications is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Light Science Techno

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Light Science Technologies are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Light Science exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Charter Communications and Light Science

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

The idea behind Charter Communications Cl and Light Science Technologies 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.