Correlation Between Charter Communications and Ooma

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

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

Diversification Opportunities for Charter Communications and Ooma

0.72

Correlation Coefficient

Charter Communications  Ooma

Poor diversification

The 3 months correlation between Charter and Ooma is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Charter Communications and Ooma Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ooma Inc 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 Ooma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ooma Inc has no effect on the direction of Charter Communications i.e., Charter Communications and Ooma go up and down completely randomly.

Pair Corralation between Charter Communications and Ooma

Given the investment horizon of 90 days Charter Communications is expected to generate 1.6 times more return on investment than Ooma. However, Charter Communications is 1.6 times more volatile than Ooma Inc. It trades about 0.24 of its potential returns per unit of risk. Ooma Inc is currently generating about 0.34 per unit of risk. If you would invest  33,130  in Charter Communications on August 31, 2024 and sell it today you would earn a total of  5,851  from holding Charter Communications or generate 17.66% return on investment over 90 days.

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

Charter Communications  vs.  Ooma Inc

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. Even with relatively sluggish basic indicators, Charter Communications reported solid returns over the last few months and may actually be approaching a breakup point.

Ooma Inc

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ooma Inc are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady primary indicators, Ooma sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Charter Communications and Ooma

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

The idea behind Charter Communications and Ooma Inc 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.