Correlation Between Cogent Communications and Münchener Rück

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

Diversification Opportunities for Cogent Communications and Münchener Rück

-0.66

Correlation Coefficient

Cogent Communications  Münchener Rück

Excellent diversification

The 3 months correlation between Cogent and Münchener is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Cogent Communications Holdings and Mnchener Rck AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mnchener Rck AG 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 Münchener Rück. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mnchener Rck AG has no effect on the direction of Cogent Communications i.e., Cogent Communications and Münchener Rück go up and down completely randomly.

Pair Corralation between Cogent Communications and Münchener Rück

Assuming the 90 days trading horizon Cogent Communications Holdings is expected to under-perform the Münchener Rück. In addition to that, Cogent Communications is 1.81 times more volatile than Mnchener Rck AG. It trades about -0.16 of its total potential returns per unit of risk. Mnchener Rck AG is currently generating about 0.25 per unit of volatility. If you would invest  48,680  in Mnchener Rck AG on December 30, 2024 and sell it today you would earn a total of  10,280  from holding Mnchener Rck AG or generate 21.12% return on investment over 90 days.

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

Cogent Communications Holdings  vs.  Mnchener Rck AG

Cogent Communications

Risk-Adjusted Performance

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 uncertain performance in the last few months, the Stock's primary indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Mnchener Rck AG

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Mnchener Rck AG are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Münchener Rück reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cogent Communications and Münchener Rück

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

The idea behind Cogent Communications Holdings and Mnchener Rck AG 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.