Correlation Between Cogent Communications and MOTOROLA SOLTN

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

Diversification Opportunities for Cogent Communications and MOTOROLA SOLTN

0.52

Correlation Coefficient

Cogent Communications  MOTOROLA SOLTN

Very weak diversification

The 3 months correlation between Cogent and MOTOROLA is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Cogent Communications Holdings and MOTOROLA SOLTN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MOTOROLA SOLTN 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 MOTOROLA SOLTN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MOTOROLA SOLTN has no effect on the direction of Cogent Communications i.e., Cogent Communications and MOTOROLA SOLTN go up and down completely randomly.

Pair Corralation between Cogent Communications and MOTOROLA SOLTN

Assuming the 90 days trading horizon Cogent Communications Holdings is expected to under-perform the MOTOROLA SOLTN. In addition to that, Cogent Communications is 1.23 times more volatile than MOTOROLA SOLTN . It trades about -0.04 of its total potential returns per unit of risk. MOTOROLA SOLTN is currently generating about 0.03 per unit of volatility. If you would invest  43,435  in MOTOROLA SOLTN on October 15, 2024 and sell it today you would earn a total of  1,045  from holding MOTOROLA SOLTN or generate 2.41% return on investment over 90 days.

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

Cogent Communications Holdings  vs.  MOTOROLA SOLTN

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

MOTOROLA SOLTN

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MOTOROLA SOLTN are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, MOTOROLA SOLTN is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Cogent Communications and MOTOROLA SOLTN

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

The idea behind Cogent Communications Holdings and MOTOROLA SOLTN 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.