Correlation Between Cogeco Communications and Finning International

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

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

Diversification Opportunities for Cogeco Communications and Finning International

0.27

Correlation Coefficient

Cogeco Communications  Finning International

Modest diversification

The 3 months correlation between Cogeco and Finning is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Cogeco Communications and Finning International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Finning International 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 Finning International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Finning International has no effect on the direction of Cogeco Communications i.e., Cogeco Communications and Finning International go up and down completely randomly.

Pair Corralation between Cogeco Communications and Finning International

Assuming the 90 days trading horizon Cogeco Communications is expected to generate 1.56 times less return on investment than Finning International. But when comparing it to its historical volatility, Cogeco Communications is 1.07 times less risky than Finning International. It trades about 0.03 of its potential returns per unit of risk. Finning International is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  3,101  in Finning International on September 10, 2024 and sell it today you would earn a total of  852.00  from holding Finning International or generate 27.48% return on investment over 90 days.

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

Cogeco Communications  vs.  Finning International

Cogeco Communications

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cogeco Communications are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Cogeco Communications displayed solid returns over the last few months and may actually be approaching a breakup point.

Finning International

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Finning International are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Finning International may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Cogeco Communications and Finning International

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

The idea behind Cogeco Communications and Finning International 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.