Correlation Between Cogent Communications and China Communications
Can any of the company-specific risk be diversified away by investing in both Cogent Communications and China 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 Cogent Communications and China Communications 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 China Communications Services, you can compare the effects of market volatilities on Cogent Communications and China 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 Cogent Communications with a short position of China Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cogent Communications and China Communications.
Diversification Opportunities for Cogent Communications and China Communications
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cogent and China is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Cogent Communications Holdings and China Communications Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Communications 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 China Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Communications has no effect on the direction of Cogent Communications i.e., Cogent Communications and China Communications go up and down completely randomly.
Pair Corralation between Cogent Communications and China Communications
Assuming the 90 days trading horizon Cogent Communications is expected to generate 4.3 times less return on investment than China Communications. But when comparing it to its historical volatility, Cogent Communications Holdings is 3.25 times less risky than China Communications. It trades about 0.06 of its potential returns per unit of risk. China Communications Services is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 13.00 in China Communications Services on September 2, 2024 and sell it today you would earn a total of 35.00 from holding China Communications Services or generate 269.23% 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. China Communications Services
Performance |
| Timeline |
| Cogent Communications |
| China Communications |
Cogent Communications and China Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cogent Communications and China Communications
The main advantage of trading using opposite Cogent Communications and China Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cogent Communications position performs unexpectedly, China 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 China Communications will offset losses from the drop in China Communications' long position.| Cogent Communications vs. Calibre Mining Corp | Cogent Communications vs. FUYO GENERAL LEASE | Cogent Communications vs. MINCO SILVER | Cogent Communications vs. Apollo Investment Corp |
| China Communications vs. Deutsche Telekom AG | China Communications vs. Superior Plus Corp | China Communications vs. NMI Holdings | China Communications vs. Origin Agritech |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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