Correlation Between T MOBILE and Charter Communications

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

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

Diversification Opportunities for T MOBILE and Charter Communications

0.9

Correlation Coefficient

T MOBILE  Charter Communications

Almost no diversification

The 3 months correlation between TM5 and Charter is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding T MOBILE US and Charter Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Charter Communications and T MOBILE 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 T MOBILE US 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 T MOBILE i.e., T MOBILE and Charter Communications go up and down completely randomly.

Pair Corralation between T MOBILE and Charter Communications

Assuming the 90 days trading horizon T MOBILE US is expected to generate 0.68 times more return on investment than Charter Communications. However, T MOBILE US is 1.46 times less risky than Charter Communications. It trades about -0.2 of its potential returns per unit of risk. Charter Communications is currently generating about -0.14 per unit of risk. If you would invest  22,789  in T MOBILE US on September 24, 2024 and sell it today you would lose (1,619) from holding T MOBILE US or give up 7.1% of portfolio value over 90 days.

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

T MOBILE US  vs.  Charter Communications

T MOBILE US

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in T MOBILE US are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, T MOBILE unveiled 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. 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 T MOBILE and Charter Communications

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