Correlation Between SEALED AIR and Cogent Communications
Can any of the company-specific risk be diversified away by investing in both SEALED AIR and Cogent 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 SEALED AIR and Cogent Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SEALED AIR and Cogent Communications Holdings, you can compare the effects of market volatilities on SEALED AIR and Cogent 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 SEALED AIR with a short position of Cogent Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of SEALED AIR and Cogent Communications.
Diversification Opportunities for SEALED AIR and Cogent Communications
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between SEALED and Cogent is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding SEALED AIR and Cogent Communications Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cogent Communications and SEALED AIR 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 SEALED AIR are associated (or correlated) with Cogent Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cogent Communications has no effect on the direction of SEALED AIR i.e., SEALED AIR and Cogent Communications go up and down completely randomly.
Pair Corralation between SEALED AIR and Cogent Communications
Assuming the 90 days trading horizon SEALED AIR is expected to generate 2.88 times less return on investment than Cogent Communications. But when comparing it to its historical volatility, SEALED AIR is 1.26 times less risky than Cogent Communications. It trades about 0.07 of its potential returns per unit of risk. Cogent Communications Holdings is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 7,209 in Cogent Communications Holdings on September 1, 2024 and sell it today you would earn a total of 541.00 from holding Cogent Communications Holdings or generate 7.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
SEALED AIR vs. Cogent Communications Holdings
Performance |
| Timeline |
| SEALED AIR |
| Cogent Communications |
SEALED AIR and Cogent Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SEALED AIR and Cogent Communications
The main advantage of trading using opposite SEALED AIR and Cogent Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SEALED AIR position performs unexpectedly, Cogent 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 Cogent Communications will offset losses from the drop in Cogent Communications' long position.| SEALED AIR vs. SIVERS SEMICONDUCTORS AB | SEALED AIR vs. Darden Restaurants | SEALED AIR vs. Reliance Steel Aluminum | SEALED AIR vs. Q2M Managementberatung AG |
| Cogent Communications vs. Perma Fix Environmental Services | Cogent Communications vs. Nippon Steel | Cogent Communications vs. Insteel Industries | Cogent Communications vs. Caltagirone SpA |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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