Correlation Between Charter Communications and RETAIL FOOD

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

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

Diversification Opportunities for Charter Communications and RETAIL FOOD

0.56

Correlation Coefficient

Charter Communications  RETAIL FOOD

Very weak diversification

The 3 months correlation between Charter and RETAIL is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Charter Communications and RETAIL FOOD GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RETAIL FOOD GROUP 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 RETAIL FOOD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RETAIL FOOD GROUP has no effect on the direction of Charter Communications i.e., Charter Communications and RETAIL FOOD go up and down completely randomly.

Pair Corralation between Charter Communications and RETAIL FOOD

Assuming the 90 days trading horizon Charter Communications is expected to generate 0.44 times more return on investment than RETAIL FOOD. However, Charter Communications is 2.26 times less risky than RETAIL FOOD. It trades about -0.23 of its potential returns per unit of risk. RETAIL FOOD GROUP is currently generating about -0.36 per unit of risk. If you would invest  35,945  in Charter Communications on October 17, 2024 and sell it today you would lose (2,270) from holding Charter Communications or give up 6.32% of portfolio value over 90 days.

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

Charter Communications  vs.  RETAIL FOOD GROUP

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.

RETAIL FOOD GROUP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RETAIL FOOD GROUP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Charter Communications and RETAIL FOOD

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

The idea behind Charter Communications and RETAIL FOOD GROUP 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.