Correlation Between Charter Communications and Tata Steel

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

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

Diversification Opportunities for Charter Communications and Tata Steel

0.63

Correlation Coefficient

Charter Communications  Tata Steel

Poor diversification

The 3 months correlation between Charter and Tata is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Charter Communications Cl and Tata Steel Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tata Steel Limited 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 Cl are associated (or correlated) with Tata Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tata Steel Limited has no effect on the direction of Charter Communications i.e., Charter Communications and Tata Steel go up and down completely randomly.

Pair Corralation between Charter Communications and Tata Steel

Assuming the 90 days trading horizon Charter Communications is expected to generate 1.24 times less return on investment than Tata Steel. But when comparing it to its historical volatility, Charter Communications Cl is 1.35 times less risky than Tata Steel. It trades about 0.13 of its potential returns per unit of risk. Tata Steel Limited is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,563  in Tata Steel Limited on April 22, 2025 and sell it today you would earn a total of  332.00  from holding Tata Steel Limited or generate 21.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Charter Communications Cl  vs.  Tata Steel Limited

Charter Communications

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Charter Communications Cl are ranked lower than 10 (%) 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.

Tata Steel Limited

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tata Steel Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain essential indicators, Tata Steel disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Charter Communications and Tata Steel

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

The idea behind Charter Communications Cl and Tata Steel Limited 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.