Correlation Between Cogent Communications and Liberty Broadband
Can any of the company-specific risk be diversified away by investing in both Cogent Communications and Liberty Broadband 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 Liberty Broadband 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 Liberty Broadband Srs, you can compare the effects of market volatilities on Cogent Communications and Liberty Broadband 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 Liberty Broadband. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cogent Communications and Liberty Broadband.
Diversification Opportunities for Cogent Communications and Liberty Broadband
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Cogent and Liberty is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Cogent Communications Group and Liberty Broadband Srs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Broadband Srs 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 Liberty Broadband. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liberty Broadband Srs has no effect on the direction of Cogent Communications i.e., Cogent Communications and Liberty Broadband go up and down completely randomly.
Pair Corralation between Cogent Communications and Liberty Broadband
Given the investment horizon of 90 days Cogent Communications Group is expected to generate 0.79 times more return on investment than Liberty Broadband. However, Cogent Communications Group is 1.27 times less risky than Liberty Broadband. It trades about 0.03 of its potential returns per unit of risk. Liberty Broadband Srs is currently generating about 0.01 per unit of risk. If you would invest 5,425 in Cogent Communications Group on December 16, 2024 and sell it today you would earn a total of 1,427 from holding Cogent Communications Group or generate 26.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cogent Communications Group vs. Liberty Broadband Srs
Performance |
| Timeline |
| Cogent Communications |
| Liberty Broadband Srs |
Cogent Communications and Liberty Broadband Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cogent Communications and Liberty Broadband
The main advantage of trading using opposite Cogent Communications and Liberty Broadband positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cogent Communications position performs unexpectedly, Liberty Broadband 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 Liberty Broadband will offset losses from the drop in Liberty Broadband's long position.| Cogent Communications vs. Liberty Broadband Srs | ||
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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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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