Correlation Between Etsy and Cogent Communications

Can any of the company-specific risk be diversified away by investing in both Etsy 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 Etsy and Cogent Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Etsy Inc and Cogent Communications Holdings, you can compare the effects of market volatilities on Etsy 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 Etsy with a short position of Cogent Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Etsy and Cogent Communications.

Diversification Opportunities for Etsy and Cogent Communications

0.0

Correlation Coefficient

Etsy  Cogent Communications

Pay attention - limited upside

The 3 months correlation between Etsy and Cogent is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Etsy Inc and Cogent Communications Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cogent Communications and Etsy 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 Etsy Inc 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 Etsy i.e., Etsy and Cogent Communications go up and down completely randomly.

Pair Corralation between Etsy and Cogent Communications

If you would invest (100.00) in Etsy Inc on October 24, 2024 and sell it today you would earn a total of  100.00  from holding Etsy Inc or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Etsy Inc  vs.  Cogent Communications Holdings

Etsy Inc

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Etsy Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Etsy is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Cogent Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cogent Communications Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, Cogent Communications is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Etsy and Cogent Communications

The main advantage of trading using opposite Etsy and Cogent Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Etsy 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.

The idea behind Etsy Inc and Cogent Communications Holdings pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.