Correlation Between INVITATION HOMES and Cogent Communications
Can any of the company-specific risk be diversified away by investing in both INVITATION HOMES 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 INVITATION HOMES and Cogent Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between INVITATION HOMES DL and Cogent Communications Holdings, you can compare the effects of market volatilities on INVITATION HOMES 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 INVITATION HOMES with a short position of Cogent Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of INVITATION HOMES and Cogent Communications.
Diversification Opportunities for INVITATION HOMES and Cogent Communications
-0.13 | Correlation Coefficient |
Good diversification
The 3 months correlation between INVITATION and Cogent is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding INVITATION HOMES DL and Cogent Communications Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cogent Communications and INVITATION HOMES 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 INVITATION HOMES DL 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 INVITATION HOMES i.e., INVITATION HOMES and Cogent Communications go up and down completely randomly.
Pair Corralation between INVITATION HOMES and Cogent Communications
Assuming the 90 days horizon INVITATION HOMES is expected to generate 2.21 times less return on investment than Cogent Communications. But when comparing it to its historical volatility, INVITATION HOMES DL is 1.54 times less risky than Cogent Communications. It trades about 0.04 of its potential returns per unit of risk. Cogent Communications Holdings is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 4,631 in Cogent Communications Holdings on September 12, 2024 and sell it today you would earn a total of 2,569 from holding Cogent Communications Holdings or generate 55.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
INVITATION HOMES DL vs. Cogent Communications Holdings
Performance |
| Timeline |
| INVITATION HOMES |
| Cogent Communications |
INVITATION HOMES and Cogent Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with INVITATION HOMES and Cogent Communications
The main advantage of trading using opposite INVITATION HOMES and Cogent Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if INVITATION HOMES 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.| INVITATION HOMES vs. American Homes 4 | INVITATION HOMES vs. Superior Plus Corp | INVITATION HOMES vs. SIVERS SEMICONDUCTORS AB | INVITATION HOMES vs. NorAm Drilling AS |
| Cogent Communications vs. Superior Plus Corp | Cogent Communications vs. SIVERS SEMICONDUCTORS AB | Cogent Communications vs. Norsk Hydro ASA | Cogent Communications vs. Reliance Steel Aluminum |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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