Correlation Between Charter Communications and EchoStar

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

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

Diversification Opportunities for Charter Communications and EchoStar

0.26

Correlation Coefficient

Charter Communications  EchoStar

Modest diversification

The 3 months correlation between Charter and EchoStar is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Charter Communications and EchoStar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EchoStar 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 EchoStar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EchoStar has no effect on the direction of Charter Communications i.e., Charter Communications and EchoStar go up and down completely randomly.

Pair Corralation between Charter Communications and EchoStar

Given the investment horizon of 90 days Charter Communications is expected to under-perform the EchoStar. But the stock apears to be less risky and, when comparing its historical volatility, Charter Communications is 2.43 times less risky than EchoStar. The stock trades about -0.28 of its potential returns per unit of risk. The EchoStar is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  1,365  in EchoStar on January 24, 2024 and sell it today you would earn a total of  165.00  from holding EchoStar or generate 12.09% return on investment over 90 days.

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

Charter Communications  vs.  EchoStar

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 weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in May 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

EchoStar

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in EchoStar are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, EchoStar may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Charter Communications and EchoStar

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

The idea behind Charter Communications and EchoStar 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 Commodity Directory module to find actively traded commodities issued by global exchanges.