Correlation Between Charter Communications and Allstate

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

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

Diversification Opportunities for Charter Communications and Allstate

-0.01

Correlation Coefficient

Charter Communications  Allstate

Good diversification

The 3 months correlation between Charter and Allstate is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Charter Communications and The Allstate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allstate 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 Allstate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allstate has no effect on the direction of Charter Communications i.e., Charter Communications and Allstate go up and down completely randomly.

Pair Corralation between Charter Communications and Allstate

Assuming the 90 days trading horizon Charter Communications is expected to generate 1.09 times less return on investment than Allstate. But when comparing it to its historical volatility, Charter Communications is 1.28 times less risky than Allstate. It trades about 0.04 of its potential returns per unit of risk. The Allstate is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  18,571  in The Allstate on December 31, 2024 and sell it today you would earn a total of  689.00  from holding The Allstate or generate 3.71% 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.  The Allstate

Charter Communications

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Charter Communications are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Charter Communications is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Allstate

Risk-Adjusted Performance

Weak

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

Pair Trading with Charter Communications and Allstate

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

The idea behind Charter Communications and The Allstate 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.