Correlation Between First National and Cogeco Communications

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

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

Diversification Opportunities for First National and Cogeco Communications

0.12

Correlation Coefficient

First National  Cogeco Communications

Average diversification

The 3 months correlation between First and Cogeco is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding First National Financial and Cogeco Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cogeco Communications and First National 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 First National Financial 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 First National i.e., First National and Cogeco Communications go up and down completely randomly.

Pair Corralation between First National and Cogeco Communications

Assuming the 90 days trading horizon First National is expected to generate 2.51 times less return on investment than Cogeco Communications. But when comparing it to its historical volatility, First National Financial is 1.32 times less risky than Cogeco Communications. It trades about 0.03 of its potential returns per unit of risk. Cogeco Communications is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  6,558  in Cogeco Communications on December 30, 2024 and sell it today you would earn a total of  282.00  from holding Cogeco Communications or generate 4.3% return on investment over 90 days.

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

First National Financial  vs.  Cogeco Communications

First National Financial

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in First National Financial are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, First National is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Cogeco Communications

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cogeco Communications are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Cogeco Communications is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with First National and Cogeco Communications

The main advantage of trading using opposite First National and Cogeco Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First National 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 First National Financial 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.

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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.