Correlation Between Cogeco Communications and Exxon

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

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

Diversification Opportunities for Cogeco Communications and Exxon

0.33

Correlation Coefficient

Cogeco Communications  Exxon

Weak diversification

The 3 months correlation between Cogeco and Exxon is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Cogeco Communications and EXXON MOBIL CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EXXON MOBIL CDR 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 Exxon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EXXON MOBIL CDR has no effect on the direction of Cogeco Communications i.e., Cogeco Communications and Exxon go up and down completely randomly.

Pair Corralation between Cogeco Communications and Exxon

Assuming the 90 days trading horizon Cogeco Communications is expected to generate 1.12 times more return on investment than Exxon. However, Cogeco Communications is 1.12 times more volatile than EXXON MOBIL CDR. It trades about -0.04 of its potential returns per unit of risk. EXXON MOBIL CDR is currently generating about -0.05 per unit of risk. If you would invest  6,926  in Cogeco Communications on December 1, 2024 and sell it today you would lose (349.00) from holding Cogeco Communications or give up 5.04% of portfolio value over 90 days.

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

Cogeco Communications  vs.  EXXON MOBIL CDR

Cogeco Communications

Risk-Adjusted Performance

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.

EXXON MOBIL CDR

Risk-Adjusted Performance

Very Weak

Over the last 90 days EXXON MOBIL CDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Exxon is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Cogeco Communications and Exxon

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

The idea behind Cogeco Communications and EXXON MOBIL CDR 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.