Correlation Between Hua Hong and Charter Communications

Can any of the company-specific risk be diversified away by investing in both Hua Hong and Charter Communications 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 Hua Hong and Charter Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hua Hong Semiconductor and Charter Communications, you can compare the effects of market volatilities on Hua Hong and Charter Communications 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 Hua Hong with a short position of Charter Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hua Hong and Charter Communications.

Diversification Opportunities for Hua Hong and Charter Communications

-0.31

Correlation Coefficient

Hua Hong  Charter Communications

Very good diversification

The 3 months correlation between Hua and Charter is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Hua Hong Semiconductor and Charter Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Charter Communications and Hua Hong 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 Hua Hong Semiconductor are associated (or correlated) with Charter Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Charter Communications has no effect on the direction of Hua Hong i.e., Hua Hong and Charter Communications go up and down completely randomly.

Pair Corralation between Hua Hong and Charter Communications

Assuming the 90 days horizon Hua Hong Semiconductor is expected to generate 1.08 times more return on investment than Charter Communications. However, Hua Hong is 1.08 times more volatile than Charter Communications. It trades about 0.06 of its potential returns per unit of risk. Charter Communications is currently generating about 0.06 per unit of risk. If you would invest  272.00  in Hua Hong Semiconductor on October 25, 2024 and sell it today you would earn a total of  24.00  from holding Hua Hong Semiconductor or generate 8.82% return on investment over 90 days.

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

Hua Hong Semiconductor  vs.  Charter Communications

Hua Hong Semiconductor

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hua Hong Semiconductor are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Hua Hong reported solid returns over the last few months and may actually be approaching a breakup point.

Charter Communications

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Charter Communications are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Charter Communications may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Hua Hong and Charter Communications

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

The idea behind Hua Hong Semiconductor and Charter Communications 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .