Correlation Between Charter Communications and United Utilities

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

Diversification Opportunities for Charter Communications and United Utilities

-0.28

Correlation Coefficient

Charter Communications  United Utilities

Very good diversification

The 3 months correlation between Charter and United is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Charter Communications Cl and United Utilities Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Utilities 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 United Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Utilities has no effect on the direction of Charter Communications i.e., Charter Communications and United Utilities go up and down completely randomly.

Pair Corralation between Charter Communications and United Utilities

Assuming the 90 days trading horizon Charter Communications Cl is expected to generate 1.32 times more return on investment than United Utilities. However, Charter Communications is 1.32 times more volatile than United Utilities Group. It trades about 0.04 of its potential returns per unit of risk. United Utilities Group is currently generating about -0.06 per unit of risk. If you would invest  34,986  in Charter Communications Cl on December 22, 2024 and sell it today you would earn a total of  1,391  from holding Charter Communications Cl or generate 3.98% return on investment over 90 days.

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

Charter Communications Cl  vs.  United Utilities Group

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 3 (%) 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 newest stock price uproar, may contribute to short-horizon losses for the private investors.

United Utilities

Risk-Adjusted Performance

Very Weak

Over the last 90 days United Utilities Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, United Utilities is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Charter Communications and United Utilities

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

The idea behind Charter Communications Cl and United Utilities Group 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.