Correlation Between Cogent Communications and APPLIED MATERIALS
Can any of the company-specific risk be diversified away by investing in both Cogent Communications and APPLIED MATERIALS 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 APPLIED MATERIALS 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 APPLIED MATERIALS, you can compare the effects of market volatilities on Cogent Communications and APPLIED MATERIALS 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 APPLIED MATERIALS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cogent Communications and APPLIED MATERIALS.
Diversification Opportunities for Cogent Communications and APPLIED MATERIALS
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between Cogent and APPLIED is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Cogent Communications Holdings and APPLIED MATERIALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on APPLIED MATERIALS 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 APPLIED MATERIALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of APPLIED MATERIALS has no effect on the direction of Cogent Communications i.e., Cogent Communications and APPLIED MATERIALS go up and down completely randomly.
Pair Corralation between Cogent Communications and APPLIED MATERIALS
Assuming the 90 days trading horizon Cogent Communications is expected to generate 1.02 times less return on investment than APPLIED MATERIALS. But when comparing it to its historical volatility, Cogent Communications Holdings is 1.12 times less risky than APPLIED MATERIALS. It trades about 0.06 of its potential returns per unit of risk. APPLIED MATERIALS is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 10,256 in APPLIED MATERIALS on September 3, 2024 and sell it today you would earn a total of 6,276 from holding APPLIED MATERIALS or generate 61.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cogent Communications Holdings vs. APPLIED MATERIALS
Performance |
| Timeline |
| Cogent Communications |
| APPLIED MATERIALS |
Cogent Communications and APPLIED MATERIALS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cogent Communications and APPLIED MATERIALS
The main advantage of trading using opposite Cogent Communications and APPLIED MATERIALS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cogent Communications position performs unexpectedly, APPLIED MATERIALS 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 APPLIED MATERIALS will offset losses from the drop in APPLIED MATERIALS's long position.| Cogent Communications vs. T Mobile | Cogent Communications vs. China Mobile Limited | Cogent Communications vs. ATT Inc | Cogent Communications vs. Nippon Telegraph and |
| APPLIED MATERIALS vs. BJs Wholesale Club | APPLIED MATERIALS vs. United Internet AG | APPLIED MATERIALS vs. Entravision Communications | APPLIED MATERIALS vs. Cogent Communications Holdings |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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