Correlation Between ITALIAN WINE and Charter Communications

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

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

Diversification Opportunities for ITALIAN WINE and Charter Communications

0.23

Correlation Coefficient

ITALIAN WINE  Charter Communications

Modest diversification

The 3 months correlation between ITALIAN and Charter is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding ITALIAN WINE BRANDS and Charter Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Charter Communications and ITALIAN WINE 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 ITALIAN WINE BRANDS 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 ITALIAN WINE i.e., ITALIAN WINE and Charter Communications go up and down completely randomly.

Pair Corralation between ITALIAN WINE and Charter Communications

Assuming the 90 days horizon ITALIAN WINE BRANDS is expected to generate 0.85 times more return on investment than Charter Communications. However, ITALIAN WINE BRANDS is 1.17 times less risky than Charter Communications. It trades about 0.02 of its potential returns per unit of risk. Charter Communications is currently generating about -0.09 per unit of risk. If you would invest  2,230  in ITALIAN WINE BRANDS on October 7, 2024 and sell it today you would earn a total of  10.00  from holding ITALIAN WINE BRANDS or generate 0.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	97.44%
Values	Daily Returns

ITALIAN WINE BRANDS  vs.  Charter Communications

ITALIAN WINE BRANDS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ITALIAN WINE BRANDS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, ITALIAN WINE is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Charter Communications

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Charter Communications are ranked lower than 7 (%) 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.

Pair Trading with ITALIAN WINE and Charter Communications

The main advantage of trading using opposite ITALIAN WINE and Charter Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ITALIAN WINE 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 ITALIAN WINE BRANDS 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.