Correlation Between Charter Communications and Newell Brands

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

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

Diversification Opportunities for Charter Communications and Newell Brands

0.58

Correlation Coefficient

Charter Communications  Newell Brands

Very weak diversification

The 3 months correlation between Charter and Newell is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Charter Communications and Newell Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newell Brands 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 Newell Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newell Brands has no effect on the direction of Charter Communications i.e., Charter Communications and Newell Brands go up and down completely randomly.

Pair Corralation between Charter Communications and Newell Brands

Assuming the 90 days trading horizon Charter Communications is expected to under-perform the Newell Brands. In addition to that, Charter Communications is 1.12 times more volatile than Newell Brands. It trades about -0.14 of its total potential returns per unit of risk. Newell Brands is currently generating about -0.07 per unit of volatility. If you would invest  6,198  in Newell Brands on October 23, 2024 and sell it today you would lose (93.00) from holding Newell Brands or give up 1.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	94.44%
Values	Daily Returns

Charter Communications  vs.  Newell Brands

Charter Communications

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Charter Communications are ranked lower than 6 (%) 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.

Newell Brands

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Newell Brands are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Newell Brands sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Charter Communications and Newell Brands

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

The idea behind Charter Communications and Newell Brands 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .