Correlation Between Cogent Communications and Sanmina

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

Diversification Opportunities for Cogent Communications and Sanmina

0.6

Correlation Coefficient

Cogent Communications  Sanmina

Poor diversification

The 3 months correlation between Cogent and Sanmina is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Cogent Communications Holdings and Sanmina in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sanmina 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 Sanmina. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sanmina has no effect on the direction of Cogent Communications i.e., Cogent Communications and Sanmina go up and down completely randomly.

Pair Corralation between Cogent Communications and Sanmina

Assuming the 90 days trading horizon Cogent Communications is expected to generate 25.54 times less return on investment than Sanmina. In addition to that, Cogent Communications is 1.27 times more volatile than Sanmina. It trades about 0.01 of its total potential returns per unit of risk. Sanmina is currently generating about 0.18 per unit of volatility. If you would invest  7,194  in Sanmina on September 17, 2024 and sell it today you would earn a total of  366.00  from holding Sanmina or generate 5.09% return on investment over 90 days.

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

Cogent Communications Holdings  vs.  Sanmina

Cogent Communications

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cogent Communications Holdings are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Cogent Communications reported solid returns over the last few months and may actually be approaching a breakup point.

Sanmina

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sanmina are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sanmina reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cogent Communications and Sanmina

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

The idea behind Cogent Communications Holdings and Sanmina 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.