Correlation Between IHS Holding and Cogent Communications

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

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

Diversification Opportunities for IHS Holding and Cogent Communications

-0.4

Correlation Coefficient

IHS Holding  Cogent Communications

Very good diversification

The 3 months correlation between IHS and Cogent is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding IHS Holding and Cogent Communications Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cogent Communications and IHS Holding 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 IHS Holding 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 IHS Holding i.e., IHS Holding and Cogent Communications go up and down completely randomly.

Pair Corralation between IHS Holding and Cogent Communications

Considering the 90-day investment horizon IHS Holding is expected to generate 3.61 times less return on investment than Cogent Communications. In addition to that, IHS Holding is 1.52 times more volatile than Cogent Communications Group. It trades about 0.03 of its total potential returns per unit of risk. Cogent Communications Group is currently generating about 0.19 per unit of volatility. If you would invest  6,825  in Cogent Communications Group on September 2, 2024 and sell it today you would earn a total of  1,394  from holding Cogent Communications Group or generate 20.42% return on investment over 90 days.

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

IHS Holding  vs.  Cogent Communications Group

IHS Holding

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in IHS Holding are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical indicators, IHS Holding is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Cogent Communications

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cogent Communications Group are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Cogent Communications demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IHS Holding and Cogent Communications

The main advantage of trading using opposite IHS Holding and Cogent Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IHS Holding 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 IHS Holding 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.