Correlation Between China Communications and Cogent Communications
Can any of the company-specific risk be diversified away by investing in both China Communications 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 Communications 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 Communications Services and Cogent Communications Holdings, you can compare the effects of market volatilities on China Communications 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 Communications with a short position of Cogent Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Communications and Cogent Communications.
Diversification Opportunities for China Communications and Cogent Communications
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between China and Cogent is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding China Communications Services 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 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 China Communications Services 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 Communications i.e., China Communications and Cogent Communications go up and down completely randomly.
Pair Corralation between China Communications and Cogent Communications
Assuming the 90 days horizon China Communications Services is expected to generate 2.17 times more return on investment than Cogent Communications. However, China Communications is 2.17 times more volatile than Cogent Communications Holdings. It trades about 0.34 of its potential returns per unit of risk. Cogent Communications Holdings is currently generating about 0.14 per unit of risk. If you would invest 53.00 in China Communications Services on November 28, 2024 and sell it today you would earn a total of 18.00 from holding China Communications Services or generate 33.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Communications Services vs. Cogent Communications Holdings
Performance |
| Timeline |
| China Communications |
| Cogent Communications |
China Communications and Cogent Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Communications and Cogent Communications
The main advantage of trading using opposite China Communications and Cogent Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Communications 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 Communications vs. Playtech plc | China Communications vs. ASPEN TECHINC DL | China Communications vs. BioNTech SE | China Communications vs. FARO TECHNOLOGIES |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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