Correlation Between Charter Communications and MG Credit

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

Diversification Opportunities for Charter Communications and MG Credit

0.47

Correlation Coefficient

Charter Communications  MG Credit

Very weak diversification

The 3 months correlation between Charter and MGCI is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Charter Communications Cl and MG Credit Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MG Credit Income 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 MG Credit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MG Credit Income has no effect on the direction of Charter Communications i.e., Charter Communications and MG Credit go up and down completely randomly.

Pair Corralation between Charter Communications and MG Credit

Assuming the 90 days trading horizon Charter Communications Cl is expected to generate 1.99 times more return on investment than MG Credit. However, Charter Communications is 1.99 times more volatile than MG Credit Income. It trades about 0.06 of its potential returns per unit of risk. MG Credit Income is currently generating about 0.03 per unit of risk. If you would invest  32,585  in Charter Communications Cl on October 8, 2024 and sell it today you would earn a total of  2,770  from holding Charter Communications Cl or generate 8.5% 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.  MG Credit Income

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.

MG Credit Income

Risk-Adjusted Performance

2 of 100

Weak

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

Pair Trading with Charter Communications and MG Credit

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

The idea behind Charter Communications Cl and MG Credit Income 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.