Correlation Between Charter Communications and Addus HomeCare

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

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

Diversification Opportunities for Charter Communications and Addus HomeCare

-0.25

Correlation Coefficient

Charter Communications  Addus HomeCare

Very good diversification

The 3 months correlation between Charter and Addus is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Charter Communications and Addus HomeCare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Addus HomeCare 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 Addus HomeCare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Addus HomeCare has no effect on the direction of Charter Communications i.e., Charter Communications and Addus HomeCare go up and down completely randomly.

Pair Corralation between Charter Communications and Addus HomeCare

Assuming the 90 days trading horizon Charter Communications is expected to under-perform the Addus HomeCare. In addition to that, Charter Communications is 1.26 times more volatile than Addus HomeCare. It trades about -0.13 of its total potential returns per unit of risk. Addus HomeCare is currently generating about 0.22 per unit of volatility. If you would invest  11,200  in Addus HomeCare on October 10, 2024 and sell it today you would earn a total of  700.00  from holding Addus HomeCare or generate 6.25% return on investment over 90 days.

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

Charter Communications  vs.  Addus HomeCare

Charter Communications

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Charter Communications are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Charter Communications unveiled solid returns over the last few months and may actually be approaching a breakup point.

Addus HomeCare

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Addus HomeCare are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Addus HomeCare is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Charter Communications and Addus HomeCare

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

The idea behind Charter Communications and Addus HomeCare 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..