Correlation Between Ooma and Charter Communications

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

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

Diversification Opportunities for Ooma and Charter Communications

0.8

Correlation Coefficient

Ooma  Charter Communications

Very poor diversification

The 3 months correlation between Ooma and Charter is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Ooma Inc and Charter Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Charter Communications and Ooma 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 Ooma Inc 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 Ooma i.e., Ooma and Charter Communications go up and down completely randomly.

Pair Corralation between Ooma and Charter Communications

Given the investment horizon of 90 days Ooma Inc is expected to generate 0.76 times more return on investment than Charter Communications. However, Ooma Inc is 1.32 times less risky than Charter Communications. It trades about 0.29 of its potential returns per unit of risk. Charter Communications is currently generating about 0.1 per unit of risk. If you would invest  1,059  in Ooma Inc on September 2, 2024 and sell it today you would earn a total of  421.00  from holding Ooma Inc or generate 39.75% return on investment over 90 days.

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

Ooma Inc  vs.  Charter Communications

Ooma Inc

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ooma Inc are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain primary indicators, Ooma sustained solid returns over the last few months and may actually be approaching a breakup point.

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

Pair Trading with Ooma and Charter Communications

The main advantage of trading using opposite Ooma and Charter Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ooma 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 Ooma Inc and Charter Communications 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.