Correlation Between Liberty Broadband and Cogent Communications

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

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

Diversification Opportunities for Liberty Broadband and Cogent Communications

-0.25

Correlation Coefficient

Liberty Broadband  Cogent Communications

Very good diversification

The 3 months correlation between Liberty and Cogent is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Liberty Broadband Srs and Cogent Communications Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cogent Communications and Liberty Broadband 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 Liberty Broadband Srs 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 Liberty Broadband i.e., Liberty Broadband and Cogent Communications go up and down completely randomly.

Pair Corralation between Liberty Broadband and Cogent Communications

Assuming the 90 days horizon Liberty Broadband Srs is expected to generate 0.91 times more return on investment than Cogent Communications. However, Liberty Broadband Srs is 1.1 times less risky than Cogent Communications. It trades about 0.13 of its potential returns per unit of risk. Cogent Communications Group is currently generating about -0.14 per unit of risk. If you would invest  7,424  in Liberty Broadband Srs on December 29, 2024 and sell it today you would earn a total of  1,080  from holding Liberty Broadband Srs or generate 14.55% return on investment over 90 days.

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

Liberty Broadband Srs  vs.  Cogent Communications Group

Liberty Broadband Srs

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Broadband Srs are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain fundamental indicators, Liberty Broadband sustained solid returns over the last few months and may actually be approaching a breakup point.

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 Liberty Broadband and Cogent Communications

The main advantage of trading using opposite Liberty Broadband and Cogent Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Liberty Broadband 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 Liberty Broadband Srs 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.