Correlation Between National Retail and Charter Communications

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

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

Diversification Opportunities for National Retail and Charter Communications

0.48

Correlation Coefficient

National Retail  Charter Communications

Very weak diversification

The 3 months correlation between National and Charter is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding National Retail Properties and Charter Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Charter Communications and National Retail 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 National Retail Properties are associated (or correlated) with Charter Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Charter Communications has no effect on the direction of National Retail i.e., National Retail and Charter Communications go up and down completely randomly.

Pair Corralation between National Retail and Charter Communications

Assuming the 90 days trading horizon National Retail Properties is expected to generate 0.82 times more return on investment than Charter Communications. However, National Retail Properties is 1.22 times less risky than Charter Communications. It trades about 0.01 of its potential returns per unit of risk. Charter Communications is currently generating about 0.0 per unit of risk. If you would invest  3,832  in National Retail Properties on December 23, 2024 and sell it today you would earn a total of  2.00  from holding National Retail Properties or generate 0.05% return on investment over 90 days.

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

National Retail Properties  vs.  Charter Communications

National Retail Prop

Risk-Adjusted Performance

Very Weak

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

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.

Pair Trading with National Retail and Charter Communications

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

The idea behind National Retail Properties and Charter Communications 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.