Correlation Between Charter Communications and Marathon Oil

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

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

Diversification Opportunities for Charter Communications and Marathon Oil

0.55

Correlation Coefficient

Charter Communications  Marathon Oil

Very weak diversification

The 3 months correlation between Charter and Marathon is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Charter Communications and Marathon Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marathon Oil and Charter Communications 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 Charter Communications are associated (or correlated) with Marathon Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marathon Oil has no effect on the direction of Charter Communications i.e., Charter Communications and Marathon Oil go up and down completely randomly.

Pair Corralation between Charter Communications and Marathon Oil

Assuming the 90 days trading horizon Charter Communications is expected to generate 1.29 times more return on investment than Marathon Oil. However, Charter Communications is 1.29 times more volatile than Marathon Oil. It trades about 0.18 of its potential returns per unit of risk. Marathon Oil is currently generating about 0.12 per unit of risk. If you would invest  3,068  in Charter Communications on September 5, 2024 and sell it today you would earn a total of  968.00  from holding Charter Communications or generate 31.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	88.71%
Values	Daily Returns

Charter Communications  vs.  Marathon Oil

Charter Communications

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Charter Communications are ranked lower than 14 (%) 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.

Marathon Oil

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Marathon Oil has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat uncertain basic indicators, Marathon Oil sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Charter Communications and Marathon Oil

The main advantage of trading using opposite Charter Communications and Marathon Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Charter Communications position performs unexpectedly, Marathon Oil 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 Marathon Oil will offset losses from the drop in Marathon Oil's long position.

The idea behind Charter Communications and Marathon Oil 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.