Correlation Between Verizon Communications and Cogent Communications
Can any of the company-specific risk be diversified away by investing in both Verizon Communications 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 Verizon Communications and Cogent Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verizon Communications and Cogent Communications Group, you can compare the effects of market volatilities on Verizon Communications 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 Verizon Communications with a short position of Cogent Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Verizon Communications and Cogent Communications.
Diversification Opportunities for Verizon Communications and Cogent Communications
-0.19 | Correlation Coefficient |
Good diversification
The 3 months correlation between Verizon and Cogent is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and Cogent Communications Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cogent Communications and Verizon 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 Verizon Communications 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 Verizon Communications i.e., Verizon Communications and Cogent Communications go up and down completely randomly.
Pair Corralation between Verizon Communications and Cogent Communications
Allowing for the 90-day total investment horizon Verizon Communications is expected to generate 0.67 times more return on investment than Cogent Communications. However, Verizon Communications is 1.5 times less risky than Cogent Communications. It trades about 0.3 of its potential returns per unit of risk. Cogent Communications Group is currently generating about 0.07 per unit of risk. If you would invest 4,133 in Verizon Communications on August 30, 2024 and sell it today you would earn a total of 305.00 from holding Verizon Communications or generate 7.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Verizon Communications vs. Cogent Communications Group
Performance |
| Timeline |
| Verizon Communications |
| Cogent Communications |
Verizon Communications and Cogent Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Verizon Communications and Cogent Communications
The main advantage of trading using opposite Verizon Communications and Cogent Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Verizon Communications 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.| Verizon Communications vs. T Mobile | Verizon Communications vs. Comcast Corp | Verizon Communications vs. Charter Communications | Verizon Communications vs. Vodafone Group PLC |
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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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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