Correlation Between Charter Communications and First Solar

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

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

Diversification Opportunities for Charter Communications and First Solar

-0.4

Correlation Coefficient

Charter Communications  First Solar

Very good diversification

The 3 months correlation between Charter and First is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Charter Communications and First Solar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Solar 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 First Solar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Solar has no effect on the direction of Charter Communications i.e., Charter Communications and First Solar go up and down completely randomly.

Pair Corralation between Charter Communications and First Solar

Assuming the 90 days trading horizon Charter Communications is expected to generate 0.85 times more return on investment than First Solar. However, Charter Communications is 1.18 times less risky than First Solar. It trades about 0.07 of its potential returns per unit of risk. First Solar is currently generating about 0.03 per unit of risk. If you would invest  30,140  in Charter Communications on October 10, 2024 and sell it today you would earn a total of  3,260  from holding Charter Communications or generate 10.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

Charter Communications  vs.  First Solar

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

First Solar

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in First Solar are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, First Solar may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Charter Communications and First Solar

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

The idea behind Charter Communications and First Solar 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.