Correlation Between Cogeco Communications and North West

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

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

Diversification Opportunities for Cogeco Communications and North West

0.53

Correlation Coefficient

Cogeco Communications  North West

Very weak diversification

The 3 months correlation between Cogeco and North is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Cogeco Communications and North West in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North West 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 North West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North West has no effect on the direction of Cogeco Communications i.e., Cogeco Communications and North West go up and down completely randomly.

Pair Corralation between Cogeco Communications and North West

Assuming the 90 days trading horizon Cogeco Communications is expected to generate 1.11 times more return on investment than North West. However, Cogeco Communications is 1.11 times more volatile than North West. It trades about 0.13 of its potential returns per unit of risk. North West is currently generating about 0.06 per unit of risk. If you would invest  6,554  in Cogeco Communications on September 10, 2024 and sell it today you would earn a total of  685.00  from holding Cogeco Communications or generate 10.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Cogeco Communications  vs.  North West

Cogeco Communications

Risk-Adjusted Performance

9 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cogeco Communications are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Cogeco Communications may actually be approaching a critical reversion point that can send shares even higher in January 2025.

North West

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in North West are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, North West is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Cogeco Communications and North West

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

The idea behind Cogeco Communications and North West 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.