Correlation Between Cogent Communications and Nordic Semiconductor
Can any of the company-specific risk be diversified away by investing in both Cogent Communications and Nordic Semiconductor 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 Nordic Semiconductor 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 Nordic Semiconductor ASA, you can compare the effects of market volatilities on Cogent Communications and Nordic Semiconductor 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 Nordic Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cogent Communications and Nordic Semiconductor.
Diversification Opportunities for Cogent Communications and Nordic Semiconductor
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Cogent and Nordic is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Cogent Communications Holdings and Nordic Semiconductor ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nordic Semiconductor ASA 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 Nordic Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nordic Semiconductor ASA has no effect on the direction of Cogent Communications i.e., Cogent Communications and Nordic Semiconductor go up and down completely randomly.
Pair Corralation between Cogent Communications and Nordic Semiconductor
Assuming the 90 days trading horizon Cogent Communications is expected to generate 1.38 times less return on investment than Nordic Semiconductor. But when comparing it to its historical volatility, Cogent Communications Holdings is 1.78 times less risky than Nordic Semiconductor. It trades about 0.03 of its potential returns per unit of risk. Nordic Semiconductor ASA is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 853.00 in Nordic Semiconductor ASA on October 7, 2024 and sell it today you would earn a total of 25.00 from holding Nordic Semiconductor ASA or generate 2.93% 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. Nordic Semiconductor ASA
Performance |
| Timeline |
| Cogent Communications |
| Nordic Semiconductor ASA |
Cogent Communications and Nordic Semiconductor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cogent Communications and Nordic Semiconductor
The main advantage of trading using opposite Cogent Communications and Nordic Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cogent Communications position performs unexpectedly, Nordic Semiconductor 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 Nordic Semiconductor will offset losses from the drop in Nordic Semiconductor's long position.The idea behind Cogent Communications Holdings and Nordic Semiconductor ASA pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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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