Correlation Between Cogent Communications and GALP ENERGIA

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

Diversification Opportunities for Cogent Communications and GALP ENERGIA

-0.58

Correlation Coefficient

Cogent Communications  GALP ENERGIA

Excellent diversification

The 3 months correlation between Cogent and GALP is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Cogent Communications Holdings and GALP ENERGIA B in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GALP ENERGIA B 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 GALP ENERGIA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GALP ENERGIA B has no effect on the direction of Cogent Communications i.e., Cogent Communications and GALP ENERGIA go up and down completely randomly.

Pair Corralation between Cogent Communications and GALP ENERGIA

Assuming the 90 days trading horizon Cogent Communications Holdings is expected to under-perform the GALP ENERGIA. But the stock apears to be less risky and, when comparing its historical volatility, Cogent Communications Holdings is 1.22 times less risky than GALP ENERGIA. The stock trades about -0.21 of its potential returns per unit of risk. The GALP ENERGIA B is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  1,621  in GALP ENERGIA B on October 5, 2024 and sell it today you would lose (38.00) from holding GALP ENERGIA B or give up 2.34% of portfolio value over 90 days.

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

Cogent Communications Holdings  vs.  GALP ENERGIA B

Cogent Communications

Risk-Adjusted Performance

0 of 100

Modest

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

GALP ENERGIA B

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GALP ENERGIA B has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Cogent Communications and GALP ENERGIA

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

The idea behind Cogent Communications Holdings and GALP ENERGIA B 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.