Correlation Between Charter Communications and Trane Technologies

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

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

Diversification Opportunities for Charter Communications and Trane Technologies

0.57

Correlation Coefficient

Charter Communications  Trane Technologies

Very weak diversification

The 3 months correlation between Charter and Trane is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Charter Communications and Trane Technologies plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trane Technologies plc 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 Trane Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trane Technologies plc has no effect on the direction of Charter Communications i.e., Charter Communications and Trane Technologies go up and down completely randomly.

Pair Corralation between Charter Communications and Trane Technologies

Assuming the 90 days trading horizon Charter Communications is expected to generate 2.1 times less return on investment than Trane Technologies. But when comparing it to its historical volatility, Charter Communications is 1.05 times less risky than Trane Technologies. It trades about 0.09 of its potential returns per unit of risk. Trane Technologies plc is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  94,732  in Trane Technologies plc on April 20, 2025 and sell it today you would earn a total of  30,643  from holding Trane Technologies plc or generate 32.35% return on investment over 90 days.

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

Charter Communications  vs.  Trane Technologies plc

Charter Communications

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Charter Communications are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Charter Communications sustained solid returns over the last few months and may actually be approaching a breakup point.

Trane Technologies plc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Trane Technologies plc are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Trane Technologies sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Charter Communications and Trane Technologies

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

The idea behind Charter Communications and Trane Technologies plc 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.