Correlation Between Cogent Communications and CAREER EDUCATION

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

Diversification Opportunities for Cogent Communications and CAREER EDUCATION

0.28

Correlation Coefficient

Cogent Communications  CAREER EDUCATION

Modest diversification

The 3 months correlation between Cogent and CAREER is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Cogent Communications Holdings and CAREER EDUCATION in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CAREER EDUCATION 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 CAREER EDUCATION. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CAREER EDUCATION has no effect on the direction of Cogent Communications i.e., Cogent Communications and CAREER EDUCATION go up and down completely randomly.

Pair Corralation between Cogent Communications and CAREER EDUCATION

Assuming the 90 days trading horizon Cogent Communications Holdings is expected to under-perform the CAREER EDUCATION. But the stock apears to be less risky and, when comparing its historical volatility, Cogent Communications Holdings is 1.44 times less risky than CAREER EDUCATION. The stock trades about -0.02 of its potential returns per unit of risk. The CAREER EDUCATION is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  1,900  in CAREER EDUCATION on October 12, 2024 and sell it today you would earn a total of  640.00  from holding CAREER EDUCATION or generate 33.68% return on investment over 90 days.

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

Cogent Communications Holdings  vs.  CAREER EDUCATION

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 newest stock price disturbance, may contribute to mid-run losses for the stockholders.

CAREER EDUCATION

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CAREER EDUCATION are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, CAREER EDUCATION exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cogent Communications and CAREER EDUCATION

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

The idea behind Cogent Communications Holdings and CAREER EDUCATION 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.