Correlation Between Sify Technologies and Cogent Communications

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

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

Diversification Opportunities for Sify Technologies and Cogent Communications

0.74

Correlation Coefficient

Sify Technologies  Cogent Communications

Poor diversification

The 3 months correlation between Sify and Cogent is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Sify Technologies Limited and Cogent Communications Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cogent Communications and Sify Technologies 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 Sify Technologies Limited 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 Sify Technologies i.e., Sify Technologies and Cogent Communications go up and down completely randomly.

Pair Corralation between Sify Technologies and Cogent Communications

Given the investment horizon of 90 days Sify Technologies Limited is expected to generate 3.12 times more return on investment than Cogent Communications. However, Sify Technologies is 3.12 times more volatile than Cogent Communications Group. It trades about 0.14 of its potential returns per unit of risk. Cogent Communications Group is currently generating about -0.02 per unit of risk. If you would invest  346.00  in Sify Technologies Limited on November 28, 2024 and sell it today you would earn a total of  134.00  from holding Sify Technologies Limited or generate 38.73% return on investment over 90 days.

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

Sify Technologies Limited  vs.  Cogent Communications Group

Sify Technologies

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sify Technologies Limited are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal technical and fundamental indicators, Sify Technologies showed solid returns over the last few months and may actually be approaching a breakup point.

Cogent Communications

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cogent Communications Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Cogent Communications is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Sify Technologies and Cogent Communications

The main advantage of trading using opposite Sify Technologies and Cogent Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sify Technologies 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 Sify Technologies Limited and Cogent Communications Group 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.