Correlation Between Liberty Latin and Cogent Communications

Can any of the company-specific risk be diversified away by investing in both Liberty Latin 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 Latin 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 Latin America and Cogent Communications Group, you can compare the effects of market volatilities on Liberty Latin 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 Latin with a short position of Cogent Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Liberty Latin and Cogent Communications.

Diversification Opportunities for Liberty Latin and Cogent Communications

0.54

Correlation Coefficient

Liberty Latin  Cogent Communications

Very weak diversification

The 3 months correlation between Liberty and Cogent is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Liberty Latin America 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 Latin 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 Latin America 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 Latin i.e., Liberty Latin and Cogent Communications go up and down completely randomly.

Pair Corralation between Liberty Latin and Cogent Communications

Assuming the 90 days horizon Liberty Latin America is expected to under-perform the Cogent Communications. In addition to that, Liberty Latin is 2.23 times more volatile than Cogent Communications Group. It trades about -0.14 of its total potential returns per unit of risk. Cogent Communications Group is currently generating about -0.06 per unit of volatility. If you would invest  8,063  in Cogent Communications Group on October 26, 2024 and sell it today you would lose (497.00) from holding Cogent Communications Group or give up 6.16% of portfolio value over 90 days.

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

Liberty Latin America  vs.  Cogent Communications Group

Liberty Latin America

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Liberty Latin America has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Cogent Communications

Risk-Adjusted Performance

0 of 100

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 fairly strong basic indicators, Cogent Communications is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Liberty Latin and Cogent Communications

The main advantage of trading using opposite Liberty Latin and Cogent Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Liberty Latin 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 Latin America 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.