Correlation Between Charter Communications and Best Buy

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

By analyzing existing cross correlation between Charter Communications and Best Buy Co, you can compare the effects of market volatilities on Charter Communications and Best Buy 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 Best Buy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Charter Communications and Best Buy.

Diversification Opportunities for Charter Communications and Best Buy

-0.42

Correlation Coefficient

Charter Communications  Best Buy

Very good diversification

The 3 months correlation between Charter and Best is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Charter Communications and Best Buy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Best Buy 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 are associated (or correlated) with Best Buy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Best Buy has no effect on the direction of Charter Communications i.e., Charter Communications and Best Buy go up and down completely randomly.

Pair Corralation between Charter Communications and Best Buy

Assuming the 90 days trading horizon Charter Communications is expected to generate 2.23 times less return on investment than Best Buy. But when comparing it to its historical volatility, Charter Communications is 1.2 times less risky than Best Buy. It trades about 0.02 of its potential returns per unit of risk. Best Buy Co is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  43,559  in Best Buy Co on October 10, 2024 and sell it today you would earn a total of  9,273  from holding Best Buy Co or generate 21.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	74.6%
Values	Daily Returns

Charter Communications  vs.  Best Buy Co

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. Despite somewhat weak fundamental indicators, Charter Communications sustained solid returns over the last few months and may actually be approaching a breakup point.

Best Buy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Best Buy Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Best Buy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Charter Communications and Best Buy

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

The idea behind Charter Communications and Best Buy Co 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.