Correlation Between Cogent Communications and BHP Group
Can any of the company-specific risk be diversified away by investing in both Cogent Communications and BHP Group 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 BHP Group 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 BHP Group Limited, you can compare the effects of market volatilities on Cogent Communications and BHP Group 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 BHP Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cogent Communications and BHP Group.
Diversification Opportunities for Cogent Communications and BHP Group
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Cogent and BHP is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Cogent Communications Holdings and BHP Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BHP Group Limited 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 BHP Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BHP Group Limited has no effect on the direction of Cogent Communications i.e., Cogent Communications and BHP Group go up and down completely randomly.
Pair Corralation between Cogent Communications and BHP Group
Assuming the 90 days trading horizon Cogent Communications Holdings is expected to generate 1.41 times more return on investment than BHP Group. However, Cogent Communications is 1.41 times more volatile than BHP Group Limited. It trades about 0.04 of its potential returns per unit of risk. BHP Group Limited is currently generating about -0.02 per unit of risk. If you would invest 6,204 in Cogent Communications Holdings on September 14, 2024 and sell it today you would earn a total of 1,046 from holding Cogent Communications Holdings or generate 16.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cogent Communications Holdings vs. BHP Group Limited
Performance |
| Timeline |
| Cogent Communications |
| BHP Group Limited |
Cogent Communications and BHP Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cogent Communications and BHP Group
The main advantage of trading using opposite Cogent Communications and BHP Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cogent Communications position performs unexpectedly, BHP Group 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 BHP Group will offset losses from the drop in BHP Group'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 |
| BHP Group vs. Chuangs China Investments | BHP Group vs. New Residential Investment | BHP Group vs. CDL INVESTMENT | BHP Group vs. SLR Investment Corp |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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