Correlation Between Cogent Communications and Mitsubishi Gas

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

Diversification Opportunities for Cogent Communications and Mitsubishi Gas

0.39

Correlation Coefficient

Cogent Communications  Mitsubishi Gas

Weak diversification

The 3 months correlation between Cogent and Mitsubishi is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Cogent Communications Holdings and Mitsubishi Gas Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsubishi Gas Chemical 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 Mitsubishi Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitsubishi Gas Chemical has no effect on the direction of Cogent Communications i.e., Cogent Communications and Mitsubishi Gas go up and down completely randomly.

Pair Corralation between Cogent Communications and Mitsubishi Gas

Assuming the 90 days trading horizon Cogent Communications Holdings is expected to under-perform the Mitsubishi Gas. In addition to that, Cogent Communications is 1.21 times more volatile than Mitsubishi Gas Chemical. It trades about -0.16 of its total potential returns per unit of risk. Mitsubishi Gas Chemical is currently generating about 0.15 per unit of volatility. If you would invest  1,650  in Mitsubishi Gas Chemical on October 21, 2024 and sell it today you would earn a total of  50.00  from holding Mitsubishi Gas Chemical or generate 3.03% 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.  Mitsubishi Gas Chemical

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 latest unsteady performance, the Stock's primary indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Mitsubishi Gas Chemical

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mitsubishi Gas Chemical are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Mitsubishi Gas is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Cogent Communications and Mitsubishi Gas

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

The idea behind Cogent Communications Holdings and Mitsubishi Gas Chemical 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.