Correlation Between KGHM Polska and Cogent Communications

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

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

Diversification Opportunities for KGHM Polska and Cogent Communications

-0.36

Correlation Coefficient

KGHM Polska  Cogent Communications

Very good diversification

The 3 months correlation between KGHM and Cogent is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding KGHM Polska Miedz and Cogent Communications Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cogent Communications and KGHM Polska 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 KGHM Polska Miedz 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 KGHM Polska i.e., KGHM Polska and Cogent Communications go up and down completely randomly.

Pair Corralation between KGHM Polska and Cogent Communications

Assuming the 90 days trading horizon KGHM Polska Miedz is expected to under-perform the Cogent Communications. In addition to that, KGHM Polska is 1.25 times more volatile than Cogent Communications Holdings. It trades about -0.34 of its total potential returns per unit of risk. Cogent Communications Holdings is currently generating about 0.03 per unit of volatility. If you would invest  7,350  in Cogent Communications Holdings on October 6, 2024 and sell it today you would earn a total of  50.00  from holding Cogent Communications Holdings or generate 0.68% return on investment over 90 days.

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

KGHM Polska Miedz  vs.  Cogent Communications Holdings

KGHM Polska Miedz

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KGHM Polska Miedz has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's technical indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Cogent Communications

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cogent Communications Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Cogent Communications may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with KGHM Polska and Cogent Communications

The main advantage of trading using opposite KGHM Polska and Cogent Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KGHM Polska 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 KGHM Polska Miedz 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.