Correlation Between IDT and Cogent Communications

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

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

Diversification Opportunities for IDT and Cogent Communications

-0.19

Correlation Coefficient

IDT  Cogent Communications

Good diversification

The 3 months correlation between IDT and Cogent is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding IDT Corp. and Cogent Communications Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cogent Communications and IDT 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 IDT Corporation 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 IDT i.e., IDT and Cogent Communications go up and down completely randomly.

Pair Corralation between IDT and Cogent Communications

Considering the 90-day investment horizon IDT Corporation is expected to generate 0.94 times more return on investment than Cogent Communications. However, IDT Corporation is 1.07 times less risky than Cogent Communications. It trades about 0.08 of its potential returns per unit of risk. Cogent Communications Group is currently generating about -0.12 per unit of risk. If you would invest  4,787  in IDT Corporation on December 27, 2024 and sell it today you would earn a total of  440.00  from holding IDT Corporation or generate 9.19% return on investment over 90 days.

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

IDT Corp.  vs.  Cogent Communications Group

IDT Corporation

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in IDT Corporation are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent fundamental indicators, IDT may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Cogent Communications

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cogent Communications Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with IDT and Cogent Communications

The main advantage of trading using opposite IDT and Cogent Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IDT 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 IDT Corporation and Cogent Communications Group 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.