Correlation Between TC Energy and Charter Communications

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

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

Diversification Opportunities for TC Energy and Charter Communications

-0.01

Correlation Coefficient

TC Energy  Charter Communications

Good diversification

The 3 months correlation between TRS and Charter is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding TC Energy and Charter Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Charter Communications and TC Energy 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 TC Energy 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 TC Energy i.e., TC Energy and Charter Communications go up and down completely randomly.

Pair Corralation between TC Energy and Charter Communications

Assuming the 90 days trading horizon TC Energy is expected to generate 0.96 times more return on investment than Charter Communications. However, TC Energy is 1.04 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 -0.03 per unit of risk. If you would invest  4,282  in TC Energy on December 21, 2024 and sell it today you would earn a total of  222.00  from holding TC Energy or generate 5.18% return on investment over 90 days.

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

TC Energy  vs.  Charter Communications

TC Energy

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in TC Energy are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, TC Energy is not utilizing all of its potentials. The current 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 TC Energy and Charter Communications

The main advantage of trading using opposite TC Energy and Charter Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TC Energy 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 TC Energy 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.