Correlation Between Cogent Communications and Glencore Plc

Can any of the company-specific risk be diversified away by investing in both Cogent Communications and Glencore Plc 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 Glencore Plc 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 Glencore plc, you can compare the effects of market volatilities on Cogent Communications and Glencore Plc 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 Glencore Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cogent Communications and Glencore Plc.

Diversification Opportunities for Cogent Communications and Glencore Plc

0.38

Correlation Coefficient

Cogent Communications  Glencore Plc

Weak diversification

The 3 months correlation between Cogent and Glencore is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Cogent Communications Holdings and Glencore plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Glencore plc 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 Glencore Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Glencore plc has no effect on the direction of Cogent Communications i.e., Cogent Communications and Glencore Plc go up and down completely randomly.

Pair Corralation between Cogent Communications and Glencore Plc

Assuming the 90 days trading horizon Cogent Communications Holdings is expected to under-perform the Glencore Plc. But the stock apears to be less risky and, when comparing its historical volatility, Cogent Communications Holdings is 1.15 times less risky than Glencore Plc. The stock trades about -0.05 of its potential returns per unit of risk. The Glencore plc is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  960.00  in Glencore plc on October 22, 2024 and sell it today you would lose (45.00) from holding Glencore plc or give up 4.69% of portfolio value over 90 days.

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

Cogent Communications Holdings  vs.  Glencore plc

Cogent Communications

Risk-Adjusted Performance

0 of 100

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 nearly stable primary indicators, Cogent Communications is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Glencore plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Glencore plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Glencore Plc is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Cogent Communications and Glencore Plc

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

The idea behind Cogent Communications Holdings and Glencore plc 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.

Check out your portfolio center.

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.