Correlation Between Charter Communications and Micron Technology

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

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

Diversification Opportunities for Charter Communications and Micron Technology

0.42

Correlation Coefficient

Charter Communications  Micron Technology

Very weak diversification

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

Pair Corralation between Charter Communications and Micron Technology

Assuming the 90 days trading horizon Charter Communications is expected to generate 0.76 times more return on investment than Micron Technology. However, Charter Communications is 1.31 times less risky than Micron Technology. It trades about 0.18 of its potential returns per unit of risk. Micron Technology is currently generating about 0.1 per unit of risk. If you would invest  3,068  in Charter Communications on September 5, 2024 and sell it today you would earn a total of  968.00  from holding Charter Communications or generate 31.55% return on investment over 90 days.

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

Charter Communications  vs.  Micron Technology

Charter Communications

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Charter Communications are ranked lower than 14 (%) 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.

Micron Technology

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Micron Technology are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Micron Technology sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Charter Communications and Micron Technology

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

The idea behind Charter Communications and Micron Technology 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.

Check out your portfolio center.

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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.