Correlation Between Charter Communications and Trane Technologies

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

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

Diversification Opportunities for Charter Communications and Trane Technologies

0.57

Correlation Coefficient

Charter Communications  Trane Technologies

Very weak diversification

The 3 months correlation between Charter and Trane is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Charter Communications and Trane Technologies plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trane Technologies plc 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 Trane Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trane Technologies plc has no effect on the direction of Charter Communications i.e., Charter Communications and Trane Technologies go up and down completely randomly.

Pair Corralation between Charter Communications and Trane Technologies

Assuming the 90 days trading horizon Charter Communications is expected to generate 1.27 times more return on investment than Trane Technologies. However, Charter Communications is 1.27 times more volatile than Trane Technologies plc. It trades about -0.01 of its potential returns per unit of risk. Trane Technologies plc is currently generating about -0.15 per unit of risk. If you would invest  3,608  in Charter Communications on December 25, 2024 and sell it today you would lose (85.00) from holding Charter Communications or give up 2.36% of portfolio value over 90 days.

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

Charter Communications  vs.  Trane Technologies plc

Charter Communications

Risk-Adjusted Performance

Very Weak

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

Trane Technologies plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Trane Technologies plc 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 somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Charter Communications and Trane Technologies

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

The idea behind Charter Communications and Trane Technologies plc 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.