Correlation Between Cogent Communications and Diageo Plc
Can any of the company-specific risk be diversified away by investing in both Cogent Communications and Diageo Plc 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 Diageo Plc 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 Diageo plc, you can compare the effects of market volatilities on Cogent Communications and Diageo Plc 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 Diageo Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cogent Communications and Diageo Plc.
Diversification Opportunities for Cogent Communications and Diageo Plc
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between Cogent and Diageo is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Cogent Communications Holdings and Diageo plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diageo plc 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 Diageo Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diageo plc has no effect on the direction of Cogent Communications i.e., Cogent Communications and Diageo Plc go up and down completely randomly.
Pair Corralation between Cogent Communications and Diageo Plc
Assuming the 90 days trading horizon Cogent Communications Holdings is expected to generate 1.65 times more return on investment than Diageo Plc. However, Cogent Communications is 1.65 times more volatile than Diageo plc. It trades about 0.05 of its potential returns per unit of risk. Diageo plc is currently generating about -0.03 per unit of risk. If you would invest 6,063 in Cogent Communications Holdings on September 4, 2024 and sell it today you would earn a total of 1,637 from holding Cogent Communications Holdings or generate 27.0% 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. Diageo plc
Performance |
| Timeline |
| Cogent Communications |
| Diageo plc |
Cogent Communications and Diageo Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cogent Communications and Diageo Plc
The main advantage of trading using opposite Cogent Communications and Diageo Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cogent Communications position performs unexpectedly, Diageo Plc 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 Diageo Plc will offset losses from the drop in Diageo Plc's long position.| Cogent Communications vs. RCM TECHNOLOGIES | Cogent Communications vs. Ultra Clean Holdings | Cogent Communications vs. Cleanaway Waste Management | Cogent Communications vs. Amkor Technology |
| Diageo Plc vs. MTI WIRELESS EDGE | Diageo Plc vs. Ribbon Communications | Diageo Plc vs. ON SEMICONDUCTOR | Diageo Plc 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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