Correlation Between Telecom Argentina and Cogent Communications

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

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

Diversification Opportunities for Telecom Argentina and Cogent Communications

-0.48

Correlation Coefficient

Telecom Argentina  Cogent Communications

Very good diversification

The 3 months correlation between Telecom and Cogent is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Telecom Argentina SA and Cogent Communications Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cogent Communications and Telecom Argentina 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 Telecom Argentina SA 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 Telecom Argentina i.e., Telecom Argentina and Cogent Communications go up and down completely randomly.

Pair Corralation between Telecom Argentina and Cogent Communications

Considering the 90-day investment horizon Telecom Argentina SA is expected to generate 2.48 times more return on investment than Cogent Communications. However, Telecom Argentina is 2.48 times more volatile than Cogent Communications Group. It trades about 0.18 of its potential returns per unit of risk. Cogent Communications Group is currently generating about -0.08 per unit of risk. If you would invest  865.00  in Telecom Argentina SA on October 25, 2024 and sell it today you would earn a total of  413.00  from holding Telecom Argentina SA or generate 47.75% return on investment over 90 days.

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

Telecom Argentina SA  vs.  Cogent Communications Group

Telecom Argentina

Risk-Adjusted Performance

14 of 100

Solid

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

Cogent Communications

Risk-Adjusted Performance

0 of 100

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 latest weak performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Telecom Argentina and Cogent Communications

The main advantage of trading using opposite Telecom Argentina and Cogent Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telecom Argentina 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 Telecom Argentina SA 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.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..