Correlation Between Qualcomm and Charter Communications

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

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

Diversification Opportunities for Qualcomm and Charter Communications

-0.2

Correlation Coefficient

Qualcomm  Charter Communications

Good diversification

The 3 months correlation between Qualcomm and Charter is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Qualcomm and Charter Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Charter Communications and Qualcomm 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 Qualcomm 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 Qualcomm i.e., Qualcomm and Charter Communications go up and down completely randomly.

Pair Corralation between Qualcomm and Charter Communications

Assuming the 90 days trading horizon Qualcomm is expected to generate 1.88 times less return on investment than Charter Communications. But when comparing it to its historical volatility, Qualcomm is 1.35 times less risky than Charter Communications. It trades about 0.06 of its potential returns per unit of risk. Charter Communications is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  3,144  in Charter Communications on October 26, 2024 and sell it today you would earn a total of  386.00  from holding Charter Communications or generate 12.28% return on investment over 90 days.

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

Qualcomm  vs.  Charter Communications

Qualcomm

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Qualcomm are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Qualcomm may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Charter Communications

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Charter Communications are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Charter Communications sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Qualcomm and Charter Communications

The main advantage of trading using opposite Qualcomm and Charter Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Qualcomm 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 Qualcomm 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 CEOs Directory module to screen CEOs from public companies around the world.