Correlation Between Retail Estates and Charter Communications

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

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

Diversification Opportunities for Retail Estates and Charter Communications

-0.89

Correlation Coefficient

Retail Estates  Charter Communications

Pay attention - limited upside

The 3 months correlation between Retail and Charter is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding Retail Estates NV and Charter Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Charter Communications and Retail Estates 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 Retail Estates NV 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 Retail Estates i.e., Retail Estates and Charter Communications go up and down completely randomly.

Pair Corralation between Retail Estates and Charter Communications

Assuming the 90 days horizon Retail Estates NV is expected to under-perform the Charter Communications. But the stock apears to be less risky and, when comparing its historical volatility, Retail Estates NV is 3.17 times less risky than Charter Communications. The stock trades about -0.18 of its potential returns per unit of risk. The Charter Communications is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  29,080  in Charter Communications on September 30, 2024 and sell it today you would earn a total of  4,545  from holding Charter Communications or generate 15.63% return on investment over 90 days.

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

Retail Estates NV  vs.  Charter Communications

Retail Estates NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Retail Estates NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

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. In spite of comparatively uncertain basic indicators, Charter Communications unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Retail Estates and Charter Communications

The main advantage of trading using opposite Retail Estates and Charter Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Retail Estates 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 Retail Estates NV 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.