Correlation Between Charter Communications and JD

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

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

Diversification Opportunities for Charter Communications and JD

0.16

Correlation Coefficient

Charter Communications  JD

Average diversification

The 3 months correlation between Charter and JD is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Charter Communications and JD Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JD Inc 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 JD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JD Inc has no effect on the direction of Charter Communications i.e., Charter Communications and JD go up and down completely randomly.

Pair Corralation between Charter Communications and JD

Assuming the 90 days trading horizon Charter Communications is expected to generate 0.83 times more return on investment than JD. However, Charter Communications is 1.2 times less risky than JD. It trades about 0.16 of its potential returns per unit of risk. JD Inc is currently generating about -0.04 per unit of risk. If you would invest  34,575  in Charter Communications on September 5, 2024 and sell it today you would earn a total of  3,290  from holding Charter Communications or generate 9.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

Charter Communications  vs.  JD Inc

Charter Communications

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Charter Communications are ranked lower than 11 (%) 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.

JD Inc

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in JD Inc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, JD reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Charter Communications and JD

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

The idea behind Charter Communications and JD Inc 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.