Correlation Between Charter Communications and ViacomCBS

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

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

Diversification Opportunities for Charter Communications and ViacomCBS

0.84

Correlation Coefficient

Charter Communications  ViacomCBS

Very poor diversification

The 3 months correlation between Charter and ViacomCBS is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Charter Communications and ViacomCBS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ViacomCBS 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 ViacomCBS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ViacomCBS has no effect on the direction of Charter Communications i.e., Charter Communications and ViacomCBS go up and down completely randomly.

Pair Corralation between Charter Communications and ViacomCBS

Assuming the 90 days horizon Charter Communications is expected to generate 1.19 times less return on investment than ViacomCBS. But when comparing it to its historical volatility, Charter Communications is 1.55 times less risky than ViacomCBS. It trades about 0.03 of its potential returns per unit of risk. ViacomCBS is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  2,005  in ViacomCBS on September 4, 2024 and sell it today you would earn a total of  155.00  from holding ViacomCBS or generate 7.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.8%
Values	Daily Returns

Charter Communications  vs.  ViacomCBS

Charter Communications

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Charter Communications are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Charter Communications reported solid returns over the last few months and may actually be approaching a breakup point.

ViacomCBS

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ViacomCBS are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, ViacomCBS may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Charter Communications and ViacomCBS

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

The idea behind Charter Communications and ViacomCBS 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.