Correlation Between FIH MOBILE and Cogent Communications

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

Diversification Opportunities for FIH MOBILE and Cogent Communications

-0.07
  Correlation Coefficient

Good diversification

The 3 months correlation between FIH and Cogent is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding FIH MOBILE and Cogent Communications Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cogent Communications and FIH MOBILE 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 FIH MOBILE 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 FIH MOBILE i.e., FIH MOBILE and Cogent Communications go up and down completely randomly.

Pair Corralation between FIH MOBILE and Cogent Communications

Assuming the 90 days trading horizon FIH MOBILE is expected to generate 2.21 times less return on investment than Cogent Communications. But when comparing it to its historical volatility, FIH MOBILE is 1.5 times less risky than Cogent Communications. It trades about 0.02 of its potential returns per unit of risk. Cogent Communications Holdings is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  5,469  in Cogent Communications Holdings on October 11, 2024 and sell it today you would earn a total of  1,731  from holding Cogent Communications Holdings or generate 31.65% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

FIH MOBILE  vs.  Cogent Communications Holdings

 Performance 
       Timeline  
FIH MOBILE 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in FIH MOBILE are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, FIH MOBILE may actually be approaching a critical reversion point that can send shares even higher in February 2025.
Cogent Communications 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Cogent Communications Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable primary indicators, Cogent Communications is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

FIH MOBILE and Cogent Communications Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with FIH MOBILE and Cogent Communications

The main advantage of trading using opposite FIH MOBILE and Cogent Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FIH MOBILE 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 FIH MOBILE and Cogent Communications Holdings 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .

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