Correlation Between Cogent Communications and ABB
Can any of the company-specific risk be diversified away by investing in both Cogent Communications and ABB 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 ABB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cogent Communications Holdings and ABB, you can compare the effects of market volatilities on Cogent Communications and ABB 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 ABB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cogent Communications and ABB.
Diversification Opportunities for Cogent Communications and ABB
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Cogent and ABB is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Cogent Communications Holdings and ABB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABB 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 Holdings are associated (or correlated) with ABB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABB has no effect on the direction of Cogent Communications i.e., Cogent Communications and ABB go up and down completely randomly.
Pair Corralation between Cogent Communications and ABB
Assuming the 90 days trading horizon Cogent Communications Holdings is expected to under-perform the ABB. But the stock apears to be less risky and, when comparing its historical volatility, Cogent Communications Holdings is 1.02 times less risky than ABB. The stock trades about -0.03 of its potential returns per unit of risk. The ABB is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 5,200 in ABB on September 13, 2024 and sell it today you would earn a total of 300.00 from holding ABB or generate 5.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cogent Communications Holdings vs. ABB
Performance |
| Timeline |
| Cogent Communications |
| ABB |
Cogent Communications and ABB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cogent Communications and ABB
The main advantage of trading using opposite Cogent Communications and ABB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cogent Communications position performs unexpectedly, ABB 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 ABB will offset losses from the drop in ABB's long position.| Cogent Communications vs. Superior Plus Corp | Cogent Communications vs. SIVERS SEMICONDUCTORS AB | Cogent Communications vs. Norsk Hydro ASA | Cogent Communications vs. Reliance Steel Aluminum |
| ABB vs. BII Railway Transportation | ABB vs. Cogent Communications Holdings | ABB vs. Transportadora de Gas | ABB vs. Entravision Communications |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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