Correlation Between Cogent Communications and KT

Can any of the company-specific risk be diversified away by investing in both Cogent Communications and KT 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 KT 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 KT Corporation, you can compare the effects of market volatilities on Cogent Communications and KT 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 KT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cogent Communications and KT.

Diversification Opportunities for Cogent Communications and KT

0.4

Correlation Coefficient

Cogent Communications  KT

Very weak diversification

The 3 months correlation between Cogent and KT is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Cogent Communications Group and KT Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KT Corporation 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 KT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KT Corporation has no effect on the direction of Cogent Communications i.e., Cogent Communications and KT go up and down completely randomly.

Pair Corralation between Cogent Communications and KT

Given the investment horizon of 90 days Cogent Communications Group is expected to generate 1.34 times more return on investment than KT. However, Cogent Communications is 1.34 times more volatile than KT Corporation. It trades about 0.21 of its potential returns per unit of risk. KT Corporation is currently generating about -0.06 per unit of risk. If you would invest  7,423  in Cogent Communications Group on November 28, 2024 and sell it today you would earn a total of  499.00  from holding Cogent Communications Group or generate 6.72% return on investment over 90 days.

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

Cogent Communications Group  vs.  KT Corp.

Cogent Communications

Risk-Adjusted Performance

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.

KT Corporation

Risk-Adjusted Performance

Very Weak

Over the last 90 days KT Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, KT is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Cogent Communications and KT

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

The idea behind Cogent Communications Group and KT Corporation 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.