Correlation Between Cogeco Communications and Sparx Technology

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

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

Diversification Opportunities for Cogeco Communications and Sparx Technology

-0.53

Correlation Coefficient

Cogeco Communications  Sparx Technology

Excellent diversification

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

Pair Corralation between Cogeco Communications and Sparx Technology

Assuming the 90 days trading horizon Cogeco Communications is expected to generate 0.42 times more return on investment than Sparx Technology. However, Cogeco Communications is 2.36 times less risky than Sparx Technology. It trades about 0.05 of its potential returns per unit of risk. Sparx Technology is currently generating about -0.11 per unit of risk. If you would invest  6,558  in Cogeco Communications on December 29, 2024 and sell it today you would earn a total of  282.00  from holding Cogeco Communications or generate 4.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.83%
Values	Daily Returns

Cogeco Communications  vs.  Sparx Technology

Cogeco Communications

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cogeco Communications are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. 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.

Sparx Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sparx Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Cogeco Communications and Sparx Technology

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

The idea behind Cogeco Communications and Sparx Technology 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.