Correlation Between Cogent Communications and Ribbon Communications
Can any of the company-specific risk be diversified away by investing in both Cogent Communications and Ribbon 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 Ribbon 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 Ribbon Communications, you can compare the effects of market volatilities on Cogent Communications and Ribbon 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 Ribbon Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cogent Communications and Ribbon Communications.
Diversification Opportunities for Cogent Communications and Ribbon Communications
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cogent and Ribbon is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Cogent Communications Holdings and Ribbon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ribbon 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 Ribbon Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ribbon Communications has no effect on the direction of Cogent Communications i.e., Cogent Communications and Ribbon Communications go up and down completely randomly.
Pair Corralation between Cogent Communications and Ribbon Communications
Assuming the 90 days trading horizon Cogent Communications is expected to generate 1.48 times less return on investment than Ribbon Communications. But when comparing it to its historical volatility, Cogent Communications Holdings is 1.19 times less risky than Ribbon Communications. It trades about 0.14 of its potential returns per unit of risk. Ribbon Communications is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 338.00 in Ribbon Communications on August 27, 2024 and sell it today you would earn a total of 34.00 from holding Ribbon Communications or generate 10.06% 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. Ribbon Communications
Performance |
| Timeline |
| Cogent Communications |
| Ribbon Communications |
Cogent Communications and Ribbon Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cogent Communications and Ribbon Communications
The main advantage of trading using opposite Cogent Communications and Ribbon Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cogent Communications position performs unexpectedly, Ribbon 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 Ribbon Communications will offset losses from the drop in Ribbon Communications' long position.| Cogent Communications vs. T Mobile | Cogent Communications vs. ATT Inc | Cogent Communications vs. Deutsche Telekom AG |
| Ribbon Communications vs. T Mobile | Ribbon Communications vs. ATT Inc | Ribbon Communications vs. Deutsche Telekom AG |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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