Correlation Between EchoStar and Charter Communications

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

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

Diversification Opportunities for EchoStar and Charter Communications

0.14

Correlation Coefficient

EchoStar  Charter Communications

Average diversification

The 3 months correlation between EchoStar and Charter is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding EchoStar and Charter Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Charter Communications and EchoStar 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 EchoStar 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 EchoStar i.e., EchoStar and Charter Communications go up and down completely randomly.

Pair Corralation between EchoStar and Charter Communications

Given the investment horizon of 90 days EchoStar is expected to generate 2.3 times more return on investment than Charter Communications. However, EchoStar is 2.3 times more volatile than Charter Communications. It trades about 0.3 of its potential returns per unit of risk. Charter Communications is currently generating about -0.26 per unit of risk. If you would invest  1,295  in EchoStar on January 26, 2024 and sell it today you would earn a total of  293.00  from holding EchoStar or generate 22.63% return on investment over 90 days.

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

EchoStar  vs.  Charter Communications

EchoStar

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in EchoStar are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, EchoStar unveiled solid returns over the last few months and may actually be approaching a breakup point.

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 uncertain 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.

Pair Trading with EchoStar and Charter Communications

The main advantage of trading using opposite EchoStar and Charter Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EchoStar 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 EchoStar 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.

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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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.