Correlation Between ITALIAN WINE and Cogent Communications

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

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

Diversification Opportunities for ITALIAN WINE and Cogent Communications

-0.21

Correlation Coefficient

ITALIAN WINE  Cogent Communications

Very good diversification

The 3 months correlation between ITALIAN and Cogent is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding ITALIAN WINE BRANDS and Cogent Communications Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cogent Communications and ITALIAN WINE 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 ITALIAN WINE BRANDS 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 ITALIAN WINE i.e., ITALIAN WINE and Cogent Communications go up and down completely randomly.

Pair Corralation between ITALIAN WINE and Cogent Communications

Assuming the 90 days horizon ITALIAN WINE BRANDS is expected to generate 1.2 times more return on investment than Cogent Communications. However, ITALIAN WINE is 1.2 times more volatile than Cogent Communications Holdings. It trades about 0.07 of its potential returns per unit of risk. Cogent Communications Holdings is currently generating about -0.06 per unit of risk. If you would invest  2,180  in ITALIAN WINE BRANDS on December 3, 2024 and sell it today you would earn a total of  200.00  from holding ITALIAN WINE BRANDS or generate 9.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

ITALIAN WINE BRANDS  vs.  Cogent Communications Holdings

ITALIAN WINE BRANDS

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ITALIAN WINE BRANDS are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, ITALIAN WINE 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 latest fragile performance, the Stock's primary indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with ITALIAN WINE and Cogent Communications

The main advantage of trading using opposite ITALIAN WINE and Cogent Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ITALIAN WINE 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 ITALIAN WINE BRANDS 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.