Correlation Between Cogent Communications and IHS Holding
Can any of the company-specific risk be diversified away by investing in both Cogent Communications and IHS Holding 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 Cogent Communications and IHS Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cogent Communications Group and IHS Holding, you can compare the effects of market volatilities on Cogent Communications and IHS Holding 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 Cogent Communications with a short position of IHS Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cogent Communications and IHS Holding.
Diversification Opportunities for Cogent Communications and IHS Holding
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Cogent and IHS is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Cogent Communications Group and IHS Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IHS Holding and Cogent 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 Cogent Communications Group are associated (or correlated) with IHS Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IHS Holding has no effect on the direction of Cogent Communications i.e., Cogent Communications and IHS Holding go up and down completely randomly.
Pair Corralation between Cogent Communications and IHS Holding
Given the investment horizon of 90 days Cogent Communications Group is expected to generate 0.62 times more return on investment than IHS Holding. However, Cogent Communications Group is 1.61 times less risky than IHS Holding. It trades about -0.02 of its potential returns per unit of risk. IHS Holding is currently generating about -0.14 per unit of risk. If you would invest 8,223 in Cogent Communications Group on August 23, 2024 and sell it today you would lose (83.00) from holding Cogent Communications Group or give up 1.01% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cogent Communications Group vs. IHS Holding
Performance |
| Timeline |
| Cogent Communications |
| IHS Holding |
Cogent Communications and IHS Holding Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cogent Communications and IHS Holding
The main advantage of trading using opposite Cogent Communications and IHS Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cogent Communications position performs unexpectedly, IHS Holding 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 IHS Holding will offset losses from the drop in IHS Holding's long position.| Cogent Communications vs. Liberty Broadband Srs | Cogent Communications vs. Charter Communications | Cogent Communications vs. Liberty Broadband Srs | Cogent Communications vs. TIM Participacoes SA |
| IHS Holding vs. Cogent Communications Group | IHS Holding vs. IDT Corporation | IHS Holding vs. Iridium Communications | IHS Holding vs. Cable One |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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