Correlation Between YY and Charter Communications

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Can any of the company-specific risk be diversified away by investing in both YY 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 YY and Charter Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between YY Inc Class and Charter Communications, you can compare the effects of market volatilities on YY 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 YY with a short position of Charter Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of YY and Charter Communications.

Diversification Opportunities for YY and Charter Communications

-0.49
  Correlation Coefficient

Very good diversification

The 3 months correlation between YY and Charter is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding YY Inc Class and Charter Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Charter Communications and YY 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 YY Inc Class 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 YY i.e., YY and Charter Communications go up and down completely randomly.

Pair Corralation between YY and Charter Communications

Allowing for the 90-day total investment horizon YY Inc Class is expected to generate 1.36 times more return on investment than Charter Communications. However, YY is 1.36 times more volatile than Charter Communications. It trades about 0.02 of its potential returns per unit of risk. Charter Communications is currently generating about -0.04 per unit of risk. If you would invest  3,208  in YY Inc Class on February 21, 2024 and sell it today you would earn a total of  134.00  from holding YY Inc Class or generate 4.18% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy99.8%
ValuesDaily Returns

YY Inc Class  vs.  Charter Communications

 Performance 
       Timeline  
YY Inc Class 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in YY Inc Class are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, YY is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.
Charter Communications 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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.

YY and Charter Communications Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with YY and Charter Communications

The main advantage of trading using opposite YY and Charter Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if YY 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 YY Inc Class 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.
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.

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