Correlation Between China Railway and Cogent Communications
Can any of the company-specific risk be diversified away by investing in both China Railway and Cogent 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 China Railway and Cogent Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Railway Construction and Cogent Communications Holdings, you can compare the effects of market volatilities on China Railway and Cogent 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 China Railway with a short position of Cogent Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Railway and Cogent Communications.
Diversification Opportunities for China Railway and Cogent Communications
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between China and Cogent is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding China Railway Construction and Cogent Communications Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cogent Communications and China Railway 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 China Railway Construction are associated (or correlated) with Cogent Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cogent Communications has no effect on the direction of China Railway i.e., China Railway and Cogent Communications go up and down completely randomly.
Pair Corralation between China Railway and Cogent Communications
If you would invest 7,200 in Cogent Communications Holdings on October 8, 2024 and sell it today you would earn a total of 150.00 from holding Cogent Communications Holdings or generate 2.08% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 93.75% |
Values | Daily Returns |
China Railway Construction vs. Cogent Communications Holdings
Performance |
Timeline |
China Railway Constr |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Cogent Communications |
China Railway and Cogent Communications Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with China Railway and Cogent Communications
The main advantage of trading using opposite China Railway and Cogent Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Railway position performs unexpectedly, Cogent 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 Cogent Communications will offset losses from the drop in Cogent Communications' long position.China Railway vs. Vinci S A | China Railway vs. Johnson Controls International | China Railway vs. Larsen Toubro Limited | China Railway vs. China Railway Group |
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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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