Correlation Between Apple and Charter Communications

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

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

Diversification Opportunities for Apple and Charter Communications

0.14

Correlation Coefficient

Apple  Charter Communications

Average diversification

The 3 months correlation between Apple and Charter is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Charter Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Charter Communications and Apple 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 Apple Inc 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 Apple i.e., Apple and Charter Communications go up and down completely randomly.

Pair Corralation between Apple and Charter Communications

Assuming the 90 days trading horizon Apple Inc is expected to generate 0.35 times more return on investment than Charter Communications. However, Apple Inc is 2.88 times less risky than Charter Communications. It trades about 0.25 of its potential returns per unit of risk. Charter Communications is currently generating about 0.09 per unit of risk. If you would invest  20,146  in Apple Inc on October 5, 2024 and sell it today you would earn a total of  3,544  from holding Apple Inc or generate 17.59% return on investment over 90 days.

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

Apple Inc  vs.  Charter Communications

Apple Inc

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Apple Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively fragile basic indicators, Apple unveiled solid returns over the last few months and may actually be approaching a breakup point.

Charter Communications

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days Charter Communications has generated negative risk-adjusted returns adding no value to investors with long positions. 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 Apple and Charter Communications

The main advantage of trading using opposite Apple and Charter Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple 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 Apple Inc 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.