Correlation Between Evolent Health and Charter Communications

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

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

Diversification Opportunities for Evolent Health and Charter Communications

-0.86

Correlation Coefficient

Evolent Health  Charter Communications

Pay attention - limited upside

The 3 months correlation between Evolent and Charter is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Evolent Health and Charter Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Charter Communications and Evolent Health 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 Evolent Health 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 Evolent Health i.e., Evolent Health and Charter Communications go up and down completely randomly.

Pair Corralation between Evolent Health and Charter Communications

Assuming the 90 days horizon Evolent Health is expected to under-perform the Charter Communications. In addition to that, Evolent Health is 1.57 times more volatile than Charter Communications. It trades about -0.03 of its total potential returns per unit of risk. Charter Communications is currently generating about 0.01 per unit of volatility. If you would invest  34,525  in Charter Communications on September 27, 2024 and sell it today you would lose (960.00) from holding Charter Communications or give up 2.78% of portfolio value over 90 days.

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

Evolent Health  vs.  Charter Communications

Evolent Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Evolent Health has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Charter Communications

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Charter Communications are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Charter Communications unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Evolent Health and Charter Communications

The main advantage of trading using opposite Evolent Health and Charter Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Evolent Health 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 Evolent Health 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.