Correlation Between Constellation Software and Charter Communications

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

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

Diversification Opportunities for Constellation Software and Charter Communications

0.7

Correlation Coefficient

Constellation Software  Charter Communications

Poor diversification

The 3 months correlation between Constellation and Charter is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Constellation Software and Charter Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Charter Communications and Constellation Software 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 Constellation Software 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 Constellation Software i.e., Constellation Software and Charter Communications go up and down completely randomly.

Pair Corralation between Constellation Software and Charter Communications

Assuming the 90 days trading horizon Constellation Software is expected to generate 4.65 times less return on investment than Charter Communications. But when comparing it to its historical volatility, Constellation Software is 2.02 times less risky than Charter Communications. It trades about 0.04 of its potential returns per unit of risk. Charter Communications is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  29,470  in Charter Communications on April 24, 2025 and sell it today you would earn a total of  3,705  from holding Charter Communications or generate 12.57% return on investment over 90 days.

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

Constellation Software  vs.  Charter Communications

Constellation Software

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Constellation Software are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, Constellation Software is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

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 nearly fragile basic indicators, Charter Communications reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Constellation Software and Charter Communications

The main advantage of trading using opposite Constellation Software and Charter Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Constellation Software 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 Constellation Software 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.