Correlation Between Dairy Farm and Charter Communications

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

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

Diversification Opportunities for Dairy Farm and Charter Communications

-0.22

Correlation Coefficient

Dairy Farm  Charter Communications

Very good diversification

The 3 months correlation between Dairy and Charter is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Dairy Farm International and Charter Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Charter Communications and Dairy Farm 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 Dairy Farm International 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 Dairy Farm i.e., Dairy Farm and Charter Communications go up and down completely randomly.

Pair Corralation between Dairy Farm and Charter Communications

Assuming the 90 days trading horizon Dairy Farm is expected to generate 1.27 times less return on investment than Charter Communications. In addition to that, Dairy Farm is 1.76 times more volatile than Charter Communications. It trades about 0.03 of its total potential returns per unit of risk. Charter Communications is currently generating about 0.07 per unit of volatility. If you would invest  33,200  in Charter Communications on December 29, 2024 and sell it today you would earn a total of  2,330  from holding Charter Communications or generate 7.02% return on investment over 90 days.

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

Dairy Farm International  vs.  Charter Communications

Dairy Farm International

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dairy Farm International are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Dairy Farm is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Charter Communications

Risk-Adjusted Performance

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 unfluctuating basic indicators, Charter Communications may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Dairy Farm and Charter Communications

The main advantage of trading using opposite Dairy Farm and Charter Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dairy Farm 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 Dairy Farm International 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.