Correlation Between Cogent Communications and Data#3

Can any of the company-specific risk be diversified away by investing in both Cogent Communications and Data#3 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 Cogent Communications and Data#3 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cogent Communications Holdings and Data3 Limited, you can compare the effects of market volatilities on Cogent Communications and Data#3 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 Cogent Communications with a short position of Data#3. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cogent Communications and Data#3.

Diversification Opportunities for Cogent Communications and Data#3

0.02

Correlation Coefficient

Cogent Communications  Data#3

Significant diversification

The 3 months correlation between Cogent and Data#3 is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Cogent Communications Holdings and Data3 Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Data3 Limited and Cogent Communications 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 Cogent Communications Holdings are associated (or correlated) with Data#3. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Data3 Limited has no effect on the direction of Cogent Communications i.e., Cogent Communications and Data#3 go up and down completely randomly.

Pair Corralation between Cogent Communications and Data#3

Assuming the 90 days trading horizon Cogent Communications Holdings is expected to generate 0.93 times more return on investment than Data#3. However, Cogent Communications Holdings is 1.08 times less risky than Data#3. It trades about 0.15 of its potential returns per unit of risk. Data3 Limited is currently generating about -0.02 per unit of risk. If you would invest  6,122  in Cogent Communications Holdings on September 18, 2024 and sell it today you would earn a total of  1,178  from holding Cogent Communications Holdings or generate 19.24% return on investment over 90 days.

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

Cogent Communications Holdings  vs.  Data3 Limited

Cogent Communications

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cogent Communications Holdings are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Cogent Communications reported solid returns over the last few months and may actually be approaching a breakup point.

Data3 Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Data3 Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Data#3 is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Cogent Communications and Data#3

The main advantage of trading using opposite Cogent Communications and Data#3 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cogent Communications position performs unexpectedly, Data#3 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 Data#3 will offset losses from the drop in Data#3's long position.

The idea behind Cogent Communications Holdings and Data3 Limited 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 CEOs Directory module to screen CEOs from public companies around the world.