Correlation Between Cogeco Communications and Caribbean Utilities

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

By analyzing existing cross correlation between Cogeco Communications and Caribbean Utilities, you can compare the effects of market volatilities on Cogeco Communications and Caribbean Utilities 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 Caribbean Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cogeco Communications and Caribbean Utilities.

Diversification Opportunities for Cogeco Communications and Caribbean Utilities

0.21

Correlation Coefficient

Cogeco Communications  Caribbean Utilities

Modest diversification

The 3 months correlation between Cogeco and Caribbean is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Cogeco Communications and Caribbean Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caribbean Utilities 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 Caribbean Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caribbean Utilities has no effect on the direction of Cogeco Communications i.e., Cogeco Communications and Caribbean Utilities go up and down completely randomly.

Pair Corralation between Cogeco Communications and Caribbean Utilities

Assuming the 90 days trading horizon Cogeco Communications is expected to generate 1.43 times more return on investment than Caribbean Utilities. However, Cogeco Communications is 1.43 times more volatile than Caribbean Utilities. It trades about -0.02 of its potential returns per unit of risk. Caribbean Utilities is currently generating about -0.11 per unit of risk. If you would invest  6,703  in Cogeco Communications on December 2, 2024 and sell it today you would lose (126.00) from holding Cogeco Communications or give up 1.88% of portfolio value over 90 days.

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

Cogeco Communications  vs.  Caribbean Utilities

Cogeco Communications

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cogeco Communications has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Caribbean Utilities

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Cogeco Communications and Caribbean Utilities

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

The idea behind Cogeco Communications and Caribbean Utilities 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.