Correlation Between Finning International and Cogeco Communications

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Can any of the company-specific risk be diversified away by investing in both Finning International 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 Finning International and Cogeco Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Finning International and Cogeco Communications, you can compare the effects of market volatilities on Finning International 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 Finning International with a short position of Cogeco Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Finning International and Cogeco Communications.

Diversification Opportunities for Finning International and Cogeco Communications

0.27
  Correlation Coefficient

Modest diversification

The 3 months correlation between Finning and Cogeco is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Finning International and Cogeco Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cogeco Communications and Finning International 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 Finning International 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 Finning International i.e., Finning International and Cogeco Communications go up and down completely randomly.

Pair Corralation between Finning International and Cogeco Communications

Assuming the 90 days trading horizon Finning International is expected to generate 25.5 times less return on investment than Cogeco Communications. In addition to that, Finning International is 1.17 times more volatile than Cogeco Communications. It trades about 0.0 of its total potential returns per unit of risk. Cogeco Communications is currently generating about 0.04 per unit of volatility. If you would invest  6,151  in Cogeco Communications on September 10, 2024 and sell it today you would earn a total of  1,314  from holding Cogeco Communications or generate 21.36% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Finning International  vs.  Cogeco Communications

 Performance 
       Timeline  
Finning International 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Finning International are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Finning International may actually be approaching a critical reversion point that can send shares even higher in January 2025.
Cogeco Communications 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Cogeco Communications are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Cogeco Communications displayed solid returns over the last few months and may actually be approaching a breakup point.

Finning International and Cogeco Communications Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Finning International and Cogeco Communications

The main advantage of trading using opposite Finning International and Cogeco Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Finning International 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 Finning International 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.

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