Correlation Between Charter Communications and Cogent Communications

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

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

Diversification Opportunities for Charter Communications and Cogent Communications

-0.36

Correlation Coefficient

Charter Communications  Cogent Communications

Very good diversification

The 3 months correlation between Charter and Cogent is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Charter Communications and Cogent Communications Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cogent Communications and Charter 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 Charter Communications are associated (or correlated) with Cogent Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cogent Communications has no effect on the direction of Charter Communications i.e., Charter Communications and Cogent Communications go up and down completely randomly.

Pair Corralation between Charter Communications and Cogent Communications

Given the investment horizon of 90 days Charter Communications is expected to generate 0.9 times more return on investment than Cogent Communications. However, Charter Communications is 1.11 times less risky than Cogent Communications. It trades about 0.07 of its potential returns per unit of risk. Cogent Communications Group is currently generating about -0.14 per unit of risk. If you would invest  34,318  in Charter Communications on December 30, 2024 and sell it today you would earn a total of  2,584  from holding Charter Communications or generate 7.53% return on investment over 90 days.

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

Charter Communications  vs.  Cogent Communications Group

Charter Communications

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Charter Communications are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, Charter Communications may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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.

Pair Trading with Charter Communications and Cogent Communications

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

The idea behind Charter Communications and Cogent Communications Group 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.