Correlation Between Royal Helium and Cogeco Communications

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

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

Diversification Opportunities for Royal Helium and Cogeco Communications

-0.28

Correlation Coefficient

Royal Helium  Cogeco Communications

Very good diversification

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

Pair Corralation between Royal Helium and Cogeco Communications

Assuming the 90 days horizon Royal Helium is expected to generate 1.17 times less return on investment than Cogeco Communications. In addition to that, Royal Helium is 7.22 times more volatile than Cogeco Communications. It trades about 0.02 of its total potential returns per unit of risk. Cogeco Communications is currently generating about 0.18 per unit of volatility. If you would invest  6,517  in Cogeco Communications on September 9, 2024 and sell it today you would earn a total of  948.00  from holding Cogeco Communications or generate 14.55% return on investment over 90 days.

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

Royal Helium  vs.  Cogeco Communications

Royal Helium

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Royal Helium are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Royal Helium may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Cogeco Communications

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cogeco Communications are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Cogeco Communications displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Royal Helium and Cogeco Communications

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

The idea behind Royal Helium and Cogeco Communications 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.