Correlation Between Cogent Communications and Globalstar

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

By analyzing existing cross correlation between Cogent Communications Group and Globalstar, you can compare the effects of market volatilities on Cogent Communications and Globalstar 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 Cogent Communications with a short position of Globalstar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cogent Communications and Globalstar.

Diversification Opportunities for Cogent Communications and Globalstar

-0.26

Correlation Coefficient

Cogent Communications  Globalstar

Very good diversification

The 3 months correlation between Cogent and Globalstar is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Cogent Communications Group and Globalstar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Globalstar and Cogent 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 Cogent Communications Group are associated (or correlated) with Globalstar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Globalstar has no effect on the direction of Cogent Communications i.e., Cogent Communications and Globalstar go up and down completely randomly.

Pair Corralation between Cogent Communications and Globalstar

Given the investment horizon of 90 days Cogent Communications is expected to generate 2.72 times less return on investment than Globalstar. But when comparing it to its historical volatility, Cogent Communications Group is 2.21 times less risky than Globalstar. It trades about 0.04 of its potential returns per unit of risk. Globalstar is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  135.00  in Globalstar on October 7, 2024 and sell it today you would earn a total of  85.00  from holding Globalstar or generate 62.96% return on investment over 90 days.

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

Cogent Communications Group  vs.  Globalstar

Cogent Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cogent Communications Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Cogent Communications is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Globalstar

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Globalstar are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, Globalstar unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cogent Communications and Globalstar

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

The idea behind Cogent Communications Group and Globalstar 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.