Correlation Between Cogent Communications and Telus Corp

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

Diversification Opportunities for Cogent Communications and Telus Corp

0.48

Correlation Coefficient

Cogent Communications  Telus Corp

Very weak diversification

The 3 months correlation between Cogent and Telus is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Cogent Communications Group and Telus Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telus Corp 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 Telus Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telus Corp has no effect on the direction of Cogent Communications i.e., Cogent Communications and Telus Corp go up and down completely randomly.

Pair Corralation between Cogent Communications and Telus Corp

Given the investment horizon of 90 days Cogent Communications Group is expected to generate 1.58 times more return on investment than Telus Corp. However, Cogent Communications is 1.58 times more volatile than Telus Corp. It trades about -0.14 of its potential returns per unit of risk. Telus Corp is currently generating about -0.44 per unit of risk. If you would invest  7,657  in Cogent Communications Group on October 10, 2024 and sell it today you would lose (408.00) from holding Cogent Communications Group or give up 5.33% 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.  Telus Corp

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 latest weak performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Telus Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Telus Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Cogent Communications and Telus Corp

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

The idea behind Cogent Communications Group and Telus Corp 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.