Correlation Between Equinix and Charter Communications

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

Diversification Opportunities for Equinix and Charter Communications

-0.71
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Equinix and Charter is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Equinix and Charter Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Charter Communications and Equinix 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 Equinix 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 Equinix i.e., Equinix and Charter Communications go up and down completely randomly.

Pair Corralation between Equinix and Charter Communications

Given the investment horizon of 90 days Equinix is expected to under-perform the Charter Communications. But the stock apears to be less risky and, when comparing its historical volatility, Equinix is 1.37 times less risky than Charter Communications. The stock trades about -0.24 of its potential returns per unit of risk. The Charter Communications is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  28,834  in Charter Communications on December 30, 2023 and sell it today you would earn a total of  229.00  from holding Charter Communications or generate 0.79% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Equinix  vs.  Charter Communications

 Performance 
       Timeline  
Equinix 

Risk-Adjusted Performance

2 of 100

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

Risk-Adjusted Performance

0 of 100

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

Equinix and Charter Communications Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Equinix and Charter Communications

The main advantage of trading using opposite Equinix and Charter Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equinix 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 Equinix 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.

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