Correlation Between FORTEC ELEKTRONIK and Charter Communications

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

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

Diversification Opportunities for FORTEC ELEKTRONIK and Charter Communications

-0.22

Correlation Coefficient

FORTEC ELEKTRONIK  Charter Communications

Very good diversification

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

Pair Corralation between FORTEC ELEKTRONIK and Charter Communications

Assuming the 90 days trading horizon FORTEC ELEKTRONIK is expected to under-perform the Charter Communications. In addition to that, FORTEC ELEKTRONIK is 1.84 times more volatile than Charter Communications. It trades about -0.05 of its total potential returns per unit of risk. Charter Communications is currently generating about -0.03 per unit of volatility. If you would invest  33,565  in Charter Communications on December 22, 2024 and sell it today you would lose (1,165) from holding Charter Communications or give up 3.47% of portfolio value over 90 days.

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

FORTEC ELEKTRONIK   vs.  Charter Communications

FORTEC ELEKTRONIK

Risk-Adjusted Performance

Very Weak

Over the last 90 days FORTEC ELEKTRONIK has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm 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 FORTEC ELEKTRONIK and Charter Communications

The main advantage of trading using opposite FORTEC ELEKTRONIK and Charter Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FORTEC ELEKTRONIK 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 FORTEC ELEKTRONIK 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.