Correlation Between Geely Automobile and Cogent Communications

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

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

Diversification Opportunities for Geely Automobile and Cogent Communications

0.28

Correlation Coefficient

Geely Automobile  Cogent Communications

Modest diversification

The 3 months correlation between Geely and Cogent is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Geely Automobile Holdings and Cogent Communications Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cogent Communications and Geely Automobile 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 Geely Automobile Holdings 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 Geely Automobile i.e., Geely Automobile and Cogent Communications go up and down completely randomly.

Pair Corralation between Geely Automobile and Cogent Communications

Assuming the 90 days horizon Geely Automobile Holdings is expected to generate 1.87 times more return on investment than Cogent Communications. However, Geely Automobile is 1.87 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 -0.21 per unit of risk. If you would invest  175.00  in Geely Automobile Holdings on October 5, 2024 and sell it today you would earn a total of  4.00  from holding Geely Automobile Holdings or generate 2.29% return on investment over 90 days.

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

Geely Automobile Holdings  vs.  Cogent Communications Holdings

Geely Automobile Holdings

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Geely Automobile Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, Geely Automobile reported solid returns over the last few months and may actually be approaching a breakup point.

Cogent Communications

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days Cogent Communications Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Pair Trading with Geely Automobile and Cogent Communications

The main advantage of trading using opposite Geely Automobile and Cogent Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Geely Automobile 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 Geely Automobile Holdings 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.