Correlation Between Charter Communications and Liberty Broadband

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

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

Diversification Opportunities for Charter Communications and Liberty Broadband

0.76

Correlation Coefficient

Charter Communications  Liberty Broadband

Poor diversification

The 3 months correlation between Charter and Liberty is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Charter Communications and Liberty Broadband Srs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Broadband Srs 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 Liberty Broadband. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liberty Broadband Srs has no effect on the direction of Charter Communications i.e., Charter Communications and Liberty Broadband go up and down completely randomly.

Pair Corralation between Charter Communications and Liberty Broadband

Given the investment horizon of 90 days Charter Communications is expected to generate 0.96 times more return on investment than Liberty Broadband. However, Charter Communications is 1.04 times less risky than Liberty Broadband. It trades about 0.06 of its potential returns per unit of risk. Liberty Broadband Srs is currently generating about 0.01 per unit of risk. If you would invest  32,408  in Charter Communications on September 28, 2024 and sell it today you would earn a total of  2,770  from holding Charter Communications or generate 8.55% return on investment over 90 days.

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

Charter Communications  vs.  Liberty Broadband Srs

Charter Communications

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Charter Communications are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, Charter Communications may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Liberty Broadband Srs

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Liberty Broadband Srs has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, Liberty Broadband is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Charter Communications and Liberty Broadband

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

The idea behind Charter Communications and Liberty Broadband Srs 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.