Correlation Between Digital Media and Cogent Biosciences

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

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

Diversification Opportunities for Digital Media and Cogent Biosciences

0.78

Correlation Coefficient

Digital Media  Cogent Biosciences

Poor diversification

The 3 months correlation between Digital and Cogent is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Digital Media Solutions and Cogent Biosciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cogent Biosciences and Digital Media 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 Digital Media Solutions are associated (or correlated) with Cogent Biosciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cogent Biosciences has no effect on the direction of Digital Media i.e., Digital Media and Cogent Biosciences go up and down completely randomly.

Pair Corralation between Digital Media and Cogent Biosciences

If you would invest  32.00  in Digital Media Solutions on October 10, 2024 and sell it today you would earn a total of  0.00  from holding Digital Media Solutions or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	5.0%
Values	Daily Returns

Digital Media Solutions  vs.  Cogent Biosciences

Digital Media Solutions

Risk-Adjusted Performance

0 of 100

Very Weak

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

Cogent Biosciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cogent Biosciences has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Digital Media and Cogent Biosciences

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

The idea behind Digital Media Solutions and Cogent Biosciences 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.