Correlation Between Cogent Communications and Shenandoah Telecommunicatio

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

Diversification Opportunities for Cogent Communications and Shenandoah Telecommunicatio

-0.41

Correlation Coefficient

Cogent Communications  Shenandoah Telecommunicatio

Very good diversification

The 3 months correlation between Cogent and Shenandoah is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Cogent Communications Group and Shenandoah Telecommunications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenandoah Telecommunicatio 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 Shenandoah Telecommunicatio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenandoah Telecommunicatio has no effect on the direction of Cogent Communications i.e., Cogent Communications and Shenandoah Telecommunicatio go up and down completely randomly.

Pair Corralation between Cogent Communications and Shenandoah Telecommunicatio

Given the investment horizon of 90 days Cogent Communications Group is expected to under-perform the Shenandoah Telecommunicatio. But the stock apears to be less risky and, when comparing its historical volatility, Cogent Communications Group is 1.29 times less risky than Shenandoah Telecommunicatio. The stock trades about -0.14 of its potential returns per unit of risk. The Shenandoah Telecommunications Co is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,242  in Shenandoah Telecommunications Co on December 30, 2024 and sell it today you would earn a total of  32.00  from holding Shenandoah Telecommunications Co or generate 2.58% return on investment over 90 days.

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

Cogent Communications Group  vs.  Shenandoah Telecommunications

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 weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Shenandoah Telecommunicatio

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Shenandoah Telecommunications Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Shenandoah Telecommunicatio is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Cogent Communications and Shenandoah Telecommunicatio

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

The idea behind Cogent Communications Group and Shenandoah Telecommunications Co 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.