Correlation Between Cogeco Communications and Acadian Timber

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

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

Diversification Opportunities for Cogeco Communications and Acadian Timber

0.13

Correlation Coefficient

Cogeco Communications  Acadian Timber

Average diversification

The 3 months correlation between Cogeco and Acadian is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Cogeco Communications and Acadian Timber Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acadian Timber Corp and Cogeco 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 Cogeco Communications are associated (or correlated) with Acadian Timber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Acadian Timber Corp has no effect on the direction of Cogeco Communications i.e., Cogeco Communications and Acadian Timber go up and down completely randomly.

Pair Corralation between Cogeco Communications and Acadian Timber

Assuming the 90 days trading horizon Cogeco Communications is expected to generate 1.48 times more return on investment than Acadian Timber. However, Cogeco Communications is 1.48 times more volatile than Acadian Timber Corp. It trades about 0.06 of its potential returns per unit of risk. Acadian Timber Corp is currently generating about 0.06 per unit of risk. If you would invest  5,888  in Cogeco Communications on October 7, 2024 and sell it today you would earn a total of  983.00  from holding Cogeco Communications or generate 16.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Cogeco Communications  vs.  Acadian Timber Corp

Cogeco Communications

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cogeco Communications are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Cogeco Communications is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Acadian Timber Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Acadian Timber Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Acadian Timber is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Cogeco Communications and Acadian Timber

The main advantage of trading using opposite Cogeco Communications and Acadian Timber positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cogeco Communications position performs unexpectedly, Acadian Timber 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 Acadian Timber will offset losses from the drop in Acadian Timber's long position.

The idea behind Cogeco Communications and Acadian Timber Corp 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.

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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.