Correlation Between Cogent Communications and Hexcel

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

Diversification Opportunities for Cogent Communications and Hexcel

0.02

Correlation Coefficient

Cogent Communications  Hexcel

Significant diversification

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

Pair Corralation between Cogent Communications and Hexcel

Assuming the 90 days trading horizon Cogent Communications is expected to generate 7.56 times less return on investment than Hexcel. In addition to that, Cogent Communications is 1.54 times more volatile than Hexcel. It trades about 0.01 of its total potential returns per unit of risk. Hexcel is currently generating about 0.1 per unit of volatility. If you would invest  5,700  in Hexcel on October 7, 2024 and sell it today you would earn a total of  300.00  from holding Hexcel or generate 5.26% 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.  Hexcel

Cogent Communications

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cogent Communications Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Cogent Communications may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Hexcel

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hexcel are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Hexcel may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Cogent Communications and Hexcel

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

The idea behind Cogent Communications Holdings and Hexcel 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.