Correlation Between Cogent Communications and RENTOKIL INITIAL

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Can any of the company-specific risk be diversified away by investing in both Cogent Communications and RENTOKIL INITIAL 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 RENTOKIL INITIAL 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 RENTOKIL INITIAL ADR5, you can compare the effects of market volatilities on Cogent Communications and RENTOKIL INITIAL 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 RENTOKIL INITIAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cogent Communications and RENTOKIL INITIAL.

Diversification Opportunities for Cogent Communications and RENTOKIL INITIAL

0.13
  Correlation Coefficient

Average diversification

The 3 months correlation between Cogent and RENTOKIL is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Cogent Communications Holdings and RENTOKIL INITIAL ADR5 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RENTOKIL INITIAL ADR5 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 RENTOKIL INITIAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RENTOKIL INITIAL ADR5 has no effect on the direction of Cogent Communications i.e., Cogent Communications and RENTOKIL INITIAL go up and down completely randomly.

Pair Corralation between Cogent Communications and RENTOKIL INITIAL

Assuming the 90 days trading horizon Cogent Communications Holdings is expected to generate 0.53 times more return on investment than RENTOKIL INITIAL. However, Cogent Communications Holdings is 1.87 times less risky than RENTOKIL INITIAL. It trades about -0.08 of its potential returns per unit of risk. RENTOKIL INITIAL ADR5 is currently generating about -0.08 per unit of risk. If you would invest  7,150  in Cogent Communications Holdings on October 22, 2024 and sell it today you would lose (150.00) from holding Cogent Communications Holdings or give up 2.1% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Cogent Communications Holdings  vs.  RENTOKIL INITIAL ADR5

 Performance 
       Timeline  
Cogent Communications 

Risk-Adjusted Performance

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Weak
 
Strong
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 latest stock price disturbance, may contribute to mid-run losses for the stockholders.
RENTOKIL INITIAL ADR5 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in RENTOKIL INITIAL ADR5 are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, RENTOKIL INITIAL is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Cogent Communications and RENTOKIL INITIAL Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Cogent Communications and RENTOKIL INITIAL

The main advantage of trading using opposite Cogent Communications and RENTOKIL INITIAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cogent Communications position performs unexpectedly, RENTOKIL INITIAL 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 RENTOKIL INITIAL will offset losses from the drop in RENTOKIL INITIAL's long position.
The idea behind Cogent Communications Holdings and RENTOKIL INITIAL ADR5 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .

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