Correlation Between Cogent Communications and Truist Financial
Can any of the company-specific risk be diversified away by investing in both Cogent Communications and Truist Financial 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 Truist Financial 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 Truist Financial, you can compare the effects of market volatilities on Cogent Communications and Truist Financial 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 Truist Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cogent Communications and Truist Financial.
Diversification Opportunities for Cogent Communications and Truist Financial
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cogent and Truist is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Cogent Communications Holdings and Truist Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Truist Financial 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 Truist Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Truist Financial has no effect on the direction of Cogent Communications i.e., Cogent Communications and Truist Financial go up and down completely randomly.
Pair Corralation between Cogent Communications and Truist Financial
Assuming the 90 days trading horizon Cogent Communications is expected to generate 1.52 times less return on investment than Truist Financial. In addition to that, Cogent Communications is 1.27 times more volatile than Truist Financial. It trades about 0.05 of its total potential returns per unit of risk. Truist Financial is currently generating about 0.1 per unit of volatility. If you would invest 2,761 in Truist Financial on September 14, 2024 and sell it today you would earn a total of 1,519 from holding Truist Financial or generate 55.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cogent Communications Holdings vs. Truist Financial
Performance |
| Timeline |
| Cogent Communications |
| Truist Financial |
Cogent Communications and Truist Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cogent Communications and Truist Financial
The main advantage of trading using opposite Cogent Communications and Truist Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cogent Communications position performs unexpectedly, Truist Financial 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 Truist Financial will offset losses from the drop in Truist Financial'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 |
| Truist Financial vs. Ribbon Communications | Truist Financial vs. KENEDIX OFFICE INV | Truist Financial vs. AIR PRODCHEMICALS | Truist Financial 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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