Correlation Between Vodafone Group and Charter Communications

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

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

Diversification Opportunities for Vodafone Group and Charter Communications

0.44

Correlation Coefficient

Vodafone Group  Charter Communications

Very weak diversification

The 3 months correlation between Vodafone and Charter is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Vodafone Group PLC and Charter Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Charter Communications and Vodafone Group 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 Vodafone Group PLC 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 Vodafone Group i.e., Vodafone Group and Charter Communications go up and down completely randomly.

Pair Corralation between Vodafone Group and Charter Communications

Considering the 90-day investment horizon Vodafone Group is expected to generate 1.04 times less return on investment than Charter Communications. But when comparing it to its historical volatility, Vodafone Group PLC is 1.16 times less risky than Charter Communications. It trades about 0.12 of its potential returns per unit of risk. Charter Communications is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  34,318  in Charter Communications on December 29, 2024 and sell it today you would earn a total of  3,884  from holding Charter Communications or generate 11.32% return on investment over 90 days.

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

Vodafone Group PLC  vs.  Charter Communications

Vodafone Group PLC

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vodafone Group PLC are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal basic indicators, Vodafone Group may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Charter Communications

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Charter Communications are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, Charter Communications may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Vodafone Group and Charter Communications

The main advantage of trading using opposite Vodafone Group and Charter Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vodafone Group 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 Vodafone Group PLC 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.

Check out your portfolio center.

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.