Correlation Between Cogent Communications and SUMITOMO P

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

Diversification Opportunities for Cogent Communications and SUMITOMO P

-0.05

Correlation Coefficient

Cogent Communications  SUMITOMO P

Good diversification

The 3 months correlation between Cogent and SUMITOMO is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Cogent Communications Holdings and SUMITOMO P SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SUMITOMO P SP 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 SUMITOMO P. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SUMITOMO P SP has no effect on the direction of Cogent Communications i.e., Cogent Communications and SUMITOMO P go up and down completely randomly.

Pair Corralation between Cogent Communications and SUMITOMO P

Assuming the 90 days trading horizon Cogent Communications Holdings is expected to under-perform the SUMITOMO P. In addition to that, Cogent Communications is 1.02 times more volatile than SUMITOMO P SP. It trades about -0.18 of its total potential returns per unit of risk. SUMITOMO P SP is currently generating about 0.06 per unit of volatility. If you would invest  1,940  in SUMITOMO P SP on September 21, 2024 and sell it today you would earn a total of  40.00  from holding SUMITOMO P SP or generate 2.06% return on investment over 90 days.

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

Cogent Communications Holdings  vs.  SUMITOMO P SP

Cogent Communications

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cogent Communications Holdings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Cogent Communications may actually be approaching a critical reversion point that can send shares even higher in January 2025.

SUMITOMO P SP

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SUMITOMO P SP are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable primary indicators, SUMITOMO P is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Cogent Communications and SUMITOMO P

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

The idea behind Cogent Communications Holdings and SUMITOMO P SP 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.