Correlation Between Cogeco Communications and Opus One

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

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

Diversification Opportunities for Cogeco Communications and Opus One

0.04

Correlation Coefficient

Cogeco Communications  Opus One

Significant diversification

The 3 months correlation between Cogeco and Opus is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Cogeco Communications and Opus One Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Opus One Resources 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 Opus One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Opus One Resources has no effect on the direction of Cogeco Communications i.e., Cogeco Communications and Opus One go up and down completely randomly.

Pair Corralation between Cogeco Communications and Opus One

Assuming the 90 days trading horizon Cogeco Communications is expected to under-perform the Opus One. But the stock apears to be less risky and, when comparing its historical volatility, Cogeco Communications is 5.19 times less risky than Opus One. The stock trades about -0.05 of its potential returns per unit of risk. The Opus One Resources is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  6.00  in Opus One Resources on September 26, 2024 and sell it today you would lose (1.00) from holding Opus One Resources or give up 16.67% of portfolio value over 90 days.

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

Cogeco Communications  vs.  Opus One Resources

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 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.

Opus One Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Opus One Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Opus One is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Cogeco Communications and Opus One

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

The idea behind Cogeco Communications and Opus One Resources 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..