Correlation Between IDT and Cogent Communications
Can any of the company-specific risk be diversified away by investing in both IDT 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 IDT and Cogent Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IDT Corporation and Cogent Communications Group, you can compare the effects of market volatilities on IDT 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 IDT with a short position of Cogent Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of IDT and Cogent Communications.
Diversification Opportunities for IDT and Cogent Communications
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between IDT and Cogent is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding IDT Corp. and Cogent Communications Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cogent Communications and IDT 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 IDT Corporation 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 IDT i.e., IDT and Cogent Communications go up and down completely randomly.
Pair Corralation between IDT and Cogent Communications
Considering the 90-day investment horizon IDT Corporation is expected to generate 0.86 times more return on investment than Cogent Communications. However, IDT Corporation is 1.17 times less risky than Cogent Communications. It trades about 0.01 of its potential returns per unit of risk. Cogent Communications Group is currently generating about -0.07 per unit of risk. If you would invest 4,707 in IDT Corporation on November 3, 2024 and sell it today you would earn a total of 11.00 from holding IDT Corporation or generate 0.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
IDT Corp. vs. Cogent Communications Group
Performance |
| Timeline |
| IDT Corporation |
| Cogent Communications |
IDT and Cogent Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IDT and Cogent Communications
The main advantage of trading using opposite IDT and Cogent Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IDT 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.The idea behind IDT Corporation and Cogent Communications Group 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.| Cogent Communications vs. Liberty Broadband Srs | Cogent Communications vs. Charter Communications | Cogent Communications vs. Liberty Broadband Srs | Cogent Communications vs. TIM Participacoes SA |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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