Correlation Between Sterling Construction and Cogent Communications
Can any of the company-specific risk be diversified away by investing in both Sterling Construction 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 Sterling Construction and Cogent Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sterling Construction and Cogent Communications Holdings, you can compare the effects of market volatilities on Sterling Construction 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 Sterling Construction with a short position of Cogent Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sterling Construction and Cogent Communications.
Diversification Opportunities for Sterling Construction and Cogent Communications
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sterling and Cogent is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Sterling Construction and Cogent Communications Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cogent Communications and Sterling Construction 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 Sterling Construction 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 Sterling Construction i.e., Sterling Construction and Cogent Communications go up and down completely randomly.
Pair Corralation between Sterling Construction and Cogent Communications
Assuming the 90 days horizon Sterling Construction is expected to under-perform the Cogent Communications. In addition to that, Sterling Construction is 1.62 times more volatile than Cogent Communications Holdings. It trades about -0.18 of its total potential returns per unit of risk. Cogent Communications Holdings is currently generating about -0.23 per unit of volatility. If you would invest 7,900 in Cogent Communications Holdings on September 23, 2024 and sell it today you would lose (600.00) from holding Cogent Communications Holdings or give up 7.59% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sterling Construction vs. Cogent Communications Holdings
Performance |
| Timeline |
| Sterling Construction |
| Cogent Communications |
Sterling Construction and Cogent Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sterling Construction and Cogent Communications
The main advantage of trading using opposite Sterling Construction and Cogent Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sterling Construction 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.| Sterling Construction vs. Vinci S A | Sterling Construction vs. Johnson Controls International | Sterling Construction vs. Larsen Toubro Limited | Sterling Construction vs. China Railway Group |
| Cogent Communications vs. T Mobile | Cogent Communications vs. China Mobile Limited | Cogent Communications vs. Verizon Communications | Cogent Communications vs. ATT Inc |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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