Correlation Between Charter Communications and Telefonica Brasil

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

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

Diversification Opportunities for Charter Communications and Telefonica Brasil

0.67

Correlation Coefficient

Charter Communications  Telefonica Brasil

Poor diversification

The 3 months correlation between Charter and Telefonica is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Charter Communications and Telefonica Brasil SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telefonica Brasil 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 Telefonica Brasil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telefonica Brasil has no effect on the direction of Charter Communications i.e., Charter Communications and Telefonica Brasil go up and down completely randomly.

Pair Corralation between Charter Communications and Telefonica Brasil

Given the investment horizon of 90 days Charter Communications is expected to generate 0.91 times more return on investment than Telefonica Brasil. However, Charter Communications is 1.1 times less risky than Telefonica Brasil. It trades about 0.1 of its potential returns per unit of risk. Telefonica Brasil SA is currently generating about -0.1 per unit of risk. If you would invest  26,508  in Charter Communications on February 21, 2024 and sell it today you would earn a total of  976.00  from holding Charter Communications or generate 3.68% 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.  Telefonica Brasil SA

Charter Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Charter Communications has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Charter Communications is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Telefonica Brasil

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Telefonica Brasil SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's forward indicators remain fairly stable which may send shares a bit higher in June 2024. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Charter Communications and Telefonica Brasil

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

The idea behind Charter Communications and Telefonica Brasil SA 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.

Check out your portfolio center.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.