Correlation Between GungHo Online and Cogent Communications

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

By analyzing existing cross correlation between GungHo Online Entertainment and Cogent Communications Holdings, you can compare the effects of market volatilities on GungHo Online 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 GungHo Online with a short position of Cogent Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of GungHo Online and Cogent Communications.

Diversification Opportunities for GungHo Online and Cogent Communications

-0.05

Correlation Coefficient

GungHo Online  Cogent Communications

Good diversification

The 3 months correlation between GungHo and Cogent is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding GungHo Online Entertainment and Cogent Communications Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cogent Communications and GungHo Online 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 GungHo Online Entertainment 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 GungHo Online i.e., GungHo Online and Cogent Communications go up and down completely randomly.

Pair Corralation between GungHo Online and Cogent Communications

Assuming the 90 days horizon GungHo Online Entertainment is expected to generate 1.02 times more return on investment than Cogent Communications. However, GungHo Online is 1.02 times more volatile than Cogent Communications Holdings. It trades about -0.06 of its potential returns per unit of risk. Cogent Communications Holdings is currently generating about -0.1 per unit of risk. If you would invest  1,990  in GungHo Online Entertainment on December 4, 2024 and sell it today you would lose (90.00) from holding GungHo Online Entertainment or give up 4.52% of portfolio value over 90 days.

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

GungHo Online Entertainment  vs.  Cogent Communications Holdings

GungHo Online Entert

Risk-Adjusted Performance

Weak

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

Cogent Communications

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cogent Communications Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's primary indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with GungHo Online and Cogent Communications

The main advantage of trading using opposite GungHo Online and Cogent Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GungHo Online 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 GungHo Online Entertainment 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.