Correlation Between Charter Communications and China Communications

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

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

Diversification Opportunities for Charter Communications and China Communications

-0.11

Correlation Coefficient

Charter Communications  China Communications

Good diversification

The 3 months correlation between Charter and China is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Charter Communications and China Communications Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Communications 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 China Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Communications has no effect on the direction of Charter Communications i.e., Charter Communications and China Communications go up and down completely randomly.

Pair Corralation between Charter Communications and China Communications

Assuming the 90 days trading horizon Charter Communications is expected to generate 36.11 times less return on investment than China Communications. But when comparing it to its historical volatility, Charter Communications is 2.8 times less risky than China Communications. It trades about 0.01 of its potential returns per unit of risk. China Communications Services is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  9.02  in China Communications Services on October 5, 2024 and sell it today you would earn a total of  45.98  from holding China Communications Services or generate 509.76% 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.  China Communications Services

Charter Communications

Risk-Adjusted Performance

0 of 100

Modest

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 fragile basic indicators, Charter Communications unveiled solid returns over the last few months and may actually be approaching a breakup point.

China Communications

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days China Communications Services has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, China Communications may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Charter Communications and China Communications

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

The idea behind Charter Communications and China Communications Services 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.