Correlation Between PRECISION DRILLING and Cogent Communications

Can any of the company-specific risk be diversified away by investing in both PRECISION DRILLING and Cogent Communications 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 PRECISION DRILLING and Cogent Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PRECISION DRILLING P and Cogent Communications Holdings, you can compare the effects of market volatilities on PRECISION DRILLING and Cogent Communications 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 PRECISION DRILLING with a short position of Cogent Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of PRECISION DRILLING and Cogent Communications.

Diversification Opportunities for PRECISION DRILLING and Cogent Communications

0.28

Correlation Coefficient

PRECISION DRILLING  Cogent Communications

Modest diversification

The 3 months correlation between PRECISION and Cogent is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding PRECISION DRILLING P and Cogent Communications Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cogent Communications and PRECISION DRILLING 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 PRECISION DRILLING P are associated (or correlated) with Cogent Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cogent Communications has no effect on the direction of PRECISION DRILLING i.e., PRECISION DRILLING and Cogent Communications go up and down completely randomly.

Pair Corralation between PRECISION DRILLING and Cogent Communications

Assuming the 90 days trading horizon PRECISION DRILLING P is expected to generate 0.9 times more return on investment than Cogent Communications. However, PRECISION DRILLING P is 1.12 times less risky than Cogent Communications. It trades about -0.27 of its potential returns per unit of risk. Cogent Communications Holdings is currently generating about -0.26 per unit of risk. If you would invest  5,850  in PRECISION DRILLING P on September 28, 2024 and sell it today you would lose (450.00) from holding PRECISION DRILLING P or give up 7.69% of portfolio value over 90 days.

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

PRECISION DRILLING P  vs.  Cogent Communications Holdings

PRECISION DRILLING

Risk-Adjusted Performance

0 of 100

Very Weak

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

Cogent Communications

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cogent Communications Holdings are ranked lower than 5 (%) 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.

Pair Trading with PRECISION DRILLING and Cogent Communications

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

The idea behind PRECISION DRILLING P and Cogent Communications Holdings 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.

Check out your portfolio center.

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.