Correlation Between Anglo American and Charter Communications

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

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

Diversification Opportunities for Anglo American and Charter Communications

0.16

Correlation Coefficient

Anglo American  Charter Communications

Average diversification

The 3 months correlation between Anglo and Charter is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Anglo American PLC and Charter Communications Cl in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Charter Communications and Anglo American 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 Anglo American 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 Anglo American i.e., Anglo American and Charter Communications go up and down completely randomly.

Pair Corralation between Anglo American and Charter Communications

Assuming the 90 days trading horizon Anglo American PLC is expected to under-perform the Charter Communications. But the stock apears to be less risky and, when comparing its historical volatility, Anglo American PLC is 1.2 times less risky than Charter Communications. The stock trades about -0.02 of its potential returns per unit of risk. The Charter Communications Cl is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  32,351  in Charter Communications Cl on September 29, 2024 and sell it today you would earn a total of  2,301  from holding Charter Communications Cl or generate 7.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Anglo American PLC  vs.  Charter Communications Cl

Anglo American PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Anglo American PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Anglo American is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Charter Communications

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Charter Communications Cl are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Charter Communications may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Anglo American and Charter Communications

The main advantage of trading using opposite Anglo American and Charter Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Anglo American 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 Anglo American PLC and Charter Communications Cl 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.