Correlation Between Cogent Communications and Weyerhaeuser

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

Diversification Opportunities for Cogent Communications and Weyerhaeuser

0.17

Correlation Coefficient

Cogent Communications  Weyerhaeuser

Average diversification

The 3 months correlation between Cogent and Weyerhaeuser is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Cogent Communications Holdings and Weyerhaeuser in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Weyerhaeuser 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 Weyerhaeuser. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Weyerhaeuser has no effect on the direction of Cogent Communications i.e., Cogent Communications and Weyerhaeuser go up and down completely randomly.

Pair Corralation between Cogent Communications and Weyerhaeuser

Assuming the 90 days trading horizon Cogent Communications Holdings is expected to generate 1.69 times more return on investment than Weyerhaeuser. However, Cogent Communications is 1.69 times more volatile than Weyerhaeuser. It trades about 0.04 of its potential returns per unit of risk. Weyerhaeuser is currently generating about -0.02 per unit of risk. If you would invest  6,157  in Cogent Communications Holdings on October 9, 2024 and sell it today you would earn a total of  1,193  from holding Cogent Communications Holdings or generate 19.38% return on investment over 90 days.

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

Cogent Communications Holdings  vs.  Weyerhaeuser

Cogent Communications

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cogent Communications Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Weyerhaeuser

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Weyerhaeuser has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Cogent Communications and Weyerhaeuser

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

The idea behind Cogent Communications Holdings and Weyerhaeuser 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.