Correlation Between Brompton Energy and Cogeco Communications

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

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

Diversification Opportunities for Brompton Energy and Cogeco Communications

0.1

Correlation Coefficient

Brompton Energy  Cogeco Communications

Average diversification

The 3 months correlation between Brompton and Cogeco is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Brompton Energy Split and Cogeco Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cogeco Communications and Brompton Energy 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 Brompton Energy Split are associated (or correlated) with Cogeco Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cogeco Communications has no effect on the direction of Brompton Energy i.e., Brompton Energy and Cogeco Communications go up and down completely randomly.

Pair Corralation between Brompton Energy and Cogeco Communications

Assuming the 90 days trading horizon Brompton Energy Split is expected to generate 2.91 times more return on investment than Cogeco Communications. However, Brompton Energy is 2.91 times more volatile than Cogeco Communications. It trades about 0.1 of its potential returns per unit of risk. Cogeco Communications is currently generating about 0.02 per unit of risk. If you would invest  366.00  in Brompton Energy Split on October 22, 2024 and sell it today you would earn a total of  169.00  from holding Brompton Energy Split or generate 46.17% return on investment over 90 days.

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

Brompton Energy Split  vs.  Cogeco Communications

Brompton Energy Split

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Brompton Energy Split are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Brompton Energy displayed solid returns over the last few months and may actually be approaching a breakup point.

Cogeco Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cogeco Communications has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Brompton Energy and Cogeco Communications

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

The idea behind Brompton Energy Split and Cogeco Communications 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.