Correlation Between Cogent Communications and SK Telecom

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

Diversification Opportunities for Cogent Communications and SK Telecom

0.41

Correlation Coefficient

Cogent Communications  SK Telecom

Very weak diversification

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

Pair Corralation between Cogent Communications and SK Telecom

Given the investment horizon of 90 days Cogent Communications Group is expected to under-perform the SK Telecom. In addition to that, Cogent Communications is 1.7 times more volatile than SK Telecom Co. It trades about -0.02 of its total potential returns per unit of risk. SK Telecom Co is currently generating about 0.0 per unit of volatility. If you would invest  2,184  in SK Telecom Co on December 18, 2024 and sell it today you would lose (16.00) from holding SK Telecom Co or give up 0.73% of portfolio value over 90 days.

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

Cogent Communications Group  vs.  SK Telecom Co

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.

SK Telecom

Risk-Adjusted Performance

Very Weak

Over the last 90 days SK Telecom Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward-looking signals, SK Telecom 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 SK Telecom

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

The idea behind Cogent Communications Group and SK Telecom 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.

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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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.