Correlation Between Cogent Communications and Gelsenwasser

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

Diversification Opportunities for Cogent Communications and Gelsenwasser

0.27

Correlation Coefficient

Cogent Communications  Gelsenwasser

Modest diversification

The 3 months correlation between Cogent and Gelsenwasser is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Cogent Communications Holdings and Gelsenwasser AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gelsenwasser 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 Gelsenwasser. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gelsenwasser AG has no effect on the direction of Cogent Communications i.e., Cogent Communications and Gelsenwasser go up and down completely randomly.

Pair Corralation between Cogent Communications and Gelsenwasser

Assuming the 90 days trading horizon Cogent Communications Holdings is expected to generate 0.78 times more return on investment than Gelsenwasser. However, Cogent Communications Holdings is 1.28 times less risky than Gelsenwasser. It trades about 0.13 of its potential returns per unit of risk. Gelsenwasser AG is currently generating about -0.04 per unit of risk. If you would invest  5,252  in Cogent Communications Holdings on October 8, 2024 and sell it today you would earn a total of  2,098  from holding Cogent Communications Holdings or generate 39.95% return on investment over 90 days.

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

Cogent Communications Holdings  vs.  Gelsenwasser AG

Cogent Communications

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cogent Communications Holdings are ranked lower than 3 (%) 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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

Gelsenwasser AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gelsenwasser AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Gelsenwasser is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Cogent Communications and Gelsenwasser

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

The idea behind Cogent Communications Holdings and Gelsenwasser 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.