Correlation Between CARSALES and Cogent Communications
Can any of the company-specific risk be diversified away by investing in both CARSALES 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 CARSALES and Cogent Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CARSALESCOM and Cogent Communications Holdings, you can compare the effects of market volatilities on CARSALES 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 CARSALES with a short position of Cogent Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of CARSALES and Cogent Communications.
Diversification Opportunities for CARSALES and Cogent Communications
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between CARSALES and Cogent is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding CARSALESCOM and Cogent Communications Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cogent Communications and CARSALES 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 CARSALESCOM 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 CARSALES i.e., CARSALES and Cogent Communications go up and down completely randomly.
Pair Corralation between CARSALES and Cogent Communications
Assuming the 90 days trading horizon CARSALESCOM is expected to generate 0.63 times more return on investment than Cogent Communications. However, CARSALESCOM is 1.59 times less risky than Cogent Communications. It trades about 0.38 of its potential returns per unit of risk. Cogent Communications Holdings is currently generating about 0.15 per unit of risk. If you would invest 2,280 in CARSALESCOM on September 1, 2024 and sell it today you would earn a total of 280.00 from holding CARSALESCOM or generate 12.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CARSALESCOM vs. Cogent Communications Holdings
Performance |
| Timeline |
| CARSALESCOM |
| Cogent Communications |
CARSALES and Cogent Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CARSALES and Cogent Communications
The main advantage of trading using opposite CARSALES and Cogent Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CARSALES 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.| CARSALES vs. CNVISION MEDIA | CARSALES vs. OURGAME INTHOLDL 00005 | CARSALES vs. Playa Hotels Resorts | CARSALES vs. Universal Entertainment |
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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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