Correlation Between Cogent Communications and Telephone

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Can any of the company-specific risk be diversified away by investing in both Cogent Communications and Telephone 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 Telephone 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 Telephone and Data, you can compare the effects of market volatilities on Cogent Communications and Telephone 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 Telephone. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cogent Communications and Telephone.

Diversification Opportunities for Cogent Communications and Telephone

CogentTelephoneDiversified AwayCogentTelephoneDiversified Away100%
0.13
  Correlation Coefficient

Average diversification

The 3 months correlation between Cogent and Telephone is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Cogent Communications Group and Telephone and Data in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telephone and Data 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 Telephone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telephone and Data has no effect on the direction of Cogent Communications i.e., Cogent Communications and Telephone go up and down completely randomly.

Pair Corralation between Cogent Communications and Telephone

Given the investment horizon of 90 days Cogent Communications Group is expected to generate 1.16 times more return on investment than Telephone. However, Cogent Communications is 1.16 times more volatile than Telephone and Data. It trades about 0.48 of its potential returns per unit of risk. Telephone and Data is currently generating about 0.41 per unit of risk. If you would invest  7,357  in Cogent Communications Group on November 21, 2024 and sell it today you would earn a total of  983.00  from holding Cogent Communications Group or generate 13.36% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Cogent Communications Group  vs.  Telephone and Data

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -10-5051015
JavaScript chart by amCharts 3.21.15CCOI TDS
       Timeline  
Cogent Communications 

Risk-Adjusted Performance

Weak

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Cogent Communications Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Cogent Communications is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb7274767880828486
Telephone and Data 

Risk-Adjusted Performance

Good

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Telephone and Data are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal fundamental indicators, Telephone unveiled solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb313233343536373839

Cogent Communications and Telephone Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-4.9-3.67-2.44-1.210.01.222.483.755.016.27 0.050.100.15
JavaScript chart by amCharts 3.21.15CCOI TDS
       Returns  

Pair Trading with Cogent Communications and Telephone

The main advantage of trading using opposite Cogent Communications and Telephone positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cogent Communications position performs unexpectedly, Telephone 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 Telephone will offset losses from the drop in Telephone's long position.
The idea behind Cogent Communications Group and Telephone and Data 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.
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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.

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