Correlation Between Charter Communications and Hongkong Land

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

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

Diversification Opportunities for Charter Communications and Hongkong Land

0.29

Correlation Coefficient

Charter Communications  Hongkong Land

Modest diversification

The 3 months correlation between Charter and Hongkong is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Charter Communications and Hongkong Land Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hongkong Land Holdings 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 Hongkong Land. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hongkong Land Holdings has no effect on the direction of Charter Communications i.e., Charter Communications and Hongkong Land go up and down completely randomly.

Pair Corralation between Charter Communications and Hongkong Land

Assuming the 90 days trading horizon Charter Communications is expected to generate 1.17 times more return on investment than Hongkong Land. However, Charter Communications is 1.17 times more volatile than Hongkong Land Holdings. It trades about 0.0 of its potential returns per unit of risk. Hongkong Land Holdings is currently generating about -0.03 per unit of risk. If you would invest  33,565  in Charter Communications on December 23, 2024 and sell it today you would lose (180.00) from holding Charter Communications or give up 0.54% 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.  Hongkong Land Holdings

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.

Hongkong Land Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hongkong Land Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Hongkong Land 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 Hongkong Land

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

The idea behind Charter Communications and Hongkong Land Holdings 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.