Correlation Between Charter Communications and Cintas

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

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

Diversification Opportunities for Charter Communications and Cintas

0.23

Correlation Coefficient

Charter Communications  Cintas

Modest diversification

The 3 months correlation between Charter and Cintas is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Charter Communications and Cintas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cintas 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 Cintas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cintas has no effect on the direction of Charter Communications i.e., Charter Communications and Cintas go up and down completely randomly.

Pair Corralation between Charter Communications and Cintas

Assuming the 90 days trading horizon Charter Communications is expected to generate 1.22 times less return on investment than Cintas. In addition to that, Charter Communications is 1.29 times more volatile than Cintas. It trades about 0.0 of its total potential returns per unit of risk. Cintas is currently generating about 0.0 per unit of volatility. If you would invest  17,926  in Cintas on December 23, 2024 and sell it today you would lose (26.00) from holding Cintas or give up 0.15% of portfolio value over 90 days.

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

Charter Communications  vs.  Cintas

Charter Communications

Risk-Adjusted Performance

Very Weak

Over the last 90 days Charter Communications has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Charter Communications is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Cintas

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cintas has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Cintas is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Charter Communications and Cintas

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

The idea behind Charter Communications and Cintas 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.