Correlation Between Cogeco Communications and Leading Edge

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

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

Diversification Opportunities for Cogeco Communications and Leading Edge

0.45

Correlation Coefficient

Cogeco Communications  Leading Edge

Very weak diversification

The 3 months correlation between Cogeco and Leading is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Cogeco Communications and Leading Edge Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leading Edge Materials 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 Leading Edge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leading Edge Materials has no effect on the direction of Cogeco Communications i.e., Cogeco Communications and Leading Edge go up and down completely randomly.

Pair Corralation between Cogeco Communications and Leading Edge

Assuming the 90 days trading horizon Cogeco Communications is expected to generate 0.5 times more return on investment than Leading Edge. However, Cogeco Communications is 2.01 times less risky than Leading Edge. It trades about -0.13 of its potential returns per unit of risk. Leading Edge Materials is currently generating about -0.09 per unit of risk. If you would invest  6,899  in Cogeco Communications on October 21, 2024 and sell it today you would lose (689.00) from holding Cogeco Communications or give up 9.99% of portfolio value over 90 days.

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

Cogeco Communications  vs.  Leading Edge Materials

Cogeco Communications

Risk-Adjusted Performance

0 of 100

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 latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Leading Edge Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Leading Edge Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Cogeco Communications and Leading Edge

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

The idea behind Cogeco Communications and Leading Edge Materials 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.