Correlation Between ADHI KARYA and Cogent Communications

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

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

Diversification Opportunities for ADHI KARYA and Cogent Communications

0.18

Correlation Coefficient

ADHI KARYA  Cogent Communications

Average diversification

The 3 months correlation between ADHI and Cogent is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding ADHI KARYA and Cogent Communications Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cogent Communications and ADHI KARYA 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 ADHI KARYA 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 ADHI KARYA i.e., ADHI KARYA and Cogent Communications go up and down completely randomly.

Pair Corralation between ADHI KARYA and Cogent Communications

Assuming the 90 days trading horizon ADHI KARYA is expected to generate 7.6 times more return on investment than Cogent Communications. However, ADHI KARYA is 7.6 times more volatile than Cogent Communications Holdings. It trades about 0.01 of its potential returns per unit of risk. Cogent Communications Holdings is currently generating about -0.1 per unit of risk. If you would invest  1.15  in ADHI KARYA on December 1, 2024 and sell it today you would lose (0.55) from holding ADHI KARYA or give up 47.83% of portfolio value over 90 days.

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

ADHI KARYA  vs.  Cogent Communications Holdings

ADHI KARYA

Risk-Adjusted Performance

Very Weak

Over the last 90 days ADHI KARYA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively fragile basic indicators, ADHI KARYA 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 Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's primary indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with ADHI KARYA and Cogent Communications

The main advantage of trading using opposite ADHI KARYA and Cogent Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ADHI KARYA 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 ADHI KARYA 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.