Correlation Between Charter Communications and Veeva Systems

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

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

Diversification Opportunities for Charter Communications and Veeva Systems

0.75

Correlation Coefficient

Charter Communications  Veeva Systems

Poor diversification

The 3 months correlation between Charter and Veeva is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Charter Communications and Veeva Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Veeva Systems 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 Veeva Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Veeva Systems has no effect on the direction of Charter Communications i.e., Charter Communications and Veeva Systems go up and down completely randomly.

Pair Corralation between Charter Communications and Veeva Systems

Assuming the 90 days horizon Charter Communications is expected to generate 1.07 times more return on investment than Veeva Systems. However, Charter Communications is 1.07 times more volatile than Veeva Systems. It trades about 0.1 of its potential returns per unit of risk. Veeva Systems is currently generating about 0.08 per unit of risk. If you would invest  29,430  in Charter Communications on September 22, 2024 and sell it today you would earn a total of  4,420  from holding Charter Communications or generate 15.02% 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.  Veeva Systems

Charter Communications

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Charter Communications are ranked lower than 7 (%) 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.

Veeva Systems

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Veeva Systems are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Veeva Systems may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Charter Communications and Veeva Systems

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

The idea behind Charter Communications and Veeva Systems 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.