Correlation Between IMPERIAL TOBACCO and Cogent Communications
Can any of the company-specific risk be diversified away by investing in both IMPERIAL TOBACCO 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 IMPERIAL TOBACCO and Cogent Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IMPERIAL TOBACCO and Cogent Communications Holdings, you can compare the effects of market volatilities on IMPERIAL TOBACCO 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 IMPERIAL TOBACCO with a short position of Cogent Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of IMPERIAL TOBACCO and Cogent Communications.
Diversification Opportunities for IMPERIAL TOBACCO and Cogent Communications
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between IMPERIAL and Cogent is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding IMPERIAL TOBACCO and Cogent Communications Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cogent Communications and IMPERIAL TOBACCO 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 IMPERIAL TOBACCO 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 IMPERIAL TOBACCO i.e., IMPERIAL TOBACCO and Cogent Communications go up and down completely randomly.
Pair Corralation between IMPERIAL TOBACCO and Cogent Communications
Assuming the 90 days trading horizon IMPERIAL TOBACCO is expected to generate 0.38 times more return on investment than Cogent Communications. However, IMPERIAL TOBACCO is 2.66 times less risky than Cogent Communications. It trades about 0.23 of its potential returns per unit of risk. Cogent Communications Holdings is currently generating about -0.09 per unit of risk. If you would invest 3,036 in IMPERIAL TOBACCO on December 2, 2024 and sell it today you would earn a total of 348.00 from holding IMPERIAL TOBACCO or generate 11.46% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
IMPERIAL TOBACCO vs. Cogent Communications Holdings
Performance |
Timeline |
IMPERIAL TOBACCO |
Cogent Communications |
IMPERIAL TOBACCO and Cogent Communications Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with IMPERIAL TOBACCO and Cogent Communications
The main advantage of trading using opposite IMPERIAL TOBACCO and Cogent Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IMPERIAL TOBACCO 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.IMPERIAL TOBACCO vs. NTG Nordic Transport | IMPERIAL TOBACCO vs. Air Transport Services | IMPERIAL TOBACCO vs. REINET INVESTMENTS SCA | IMPERIAL TOBACCO vs. PennyMac Mortgage Investment |
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Check out your portfolio center.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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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