Correlation Between Charter Communications and Vodafone Group

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

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

Diversification Opportunities for Charter Communications and Vodafone Group

0.44

Correlation Coefficient

Charter Communications  Vodafone Group

Very weak diversification

The 3 months correlation between Charter and Vodafone is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Charter Communications and Vodafone Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vodafone Group 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 Vodafone Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vodafone Group PLC has no effect on the direction of Charter Communications i.e., Charter Communications and Vodafone Group go up and down completely randomly.

Pair Corralation between Charter Communications and Vodafone Group

Given the investment horizon of 90 days Charter Communications is expected to generate 1.16 times more return on investment than Vodafone Group. However, Charter Communications is 1.16 times more volatile than Vodafone Group PLC. It trades about 0.11 of its potential returns per unit of risk. Vodafone Group PLC is currently generating about 0.12 per unit of risk. If you would invest  34,318  in Charter Communications on December 29, 2024 and sell it today you would earn a total of  3,884  from holding Charter Communications or generate 11.32% 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.  Vodafone Group PLC

Charter Communications

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Charter Communications are ranked lower than 8 (%) 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 April 2025.

Vodafone Group PLC

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vodafone Group PLC are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal basic indicators, Vodafone Group may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Charter Communications and Vodafone Group

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

The idea behind Charter Communications and Vodafone Group 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 CEOs Directory module to screen CEOs from public companies around the world.