Correlation Between X FAB and Cogent Communications

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

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

Diversification Opportunities for X FAB and Cogent Communications

-0.41

Correlation Coefficient

X FAB  Cogent Communications

Very good diversification

The 3 months correlation between XFB and Cogent is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding X FAB Silicon Foundries and Cogent Communications Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cogent Communications and X FAB 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 X FAB Silicon Foundries 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 X FAB i.e., X FAB and Cogent Communications go up and down completely randomly.

Pair Corralation between X FAB and Cogent Communications

Assuming the 90 days trading horizon X FAB Silicon Foundries is expected to generate 1.26 times more return on investment than Cogent Communications. However, X FAB is 1.26 times more volatile than Cogent Communications Holdings. It trades about 0.02 of its potential returns per unit of risk. Cogent Communications Holdings is currently generating about -0.06 per unit of risk. If you would invest  457.00  in X FAB Silicon Foundries on December 4, 2024 and sell it today you would earn a total of  4.00  from holding X FAB Silicon Foundries or generate 0.88% return on investment over 90 days.

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

X FAB Silicon Foundries  vs.  Cogent Communications Holdings

X FAB Silicon

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in X FAB Silicon Foundries are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental drivers, X FAB is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Cogent Communications

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cogent Communications Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's primary indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with X FAB and Cogent Communications

The main advantage of trading using opposite X FAB and Cogent Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if X FAB 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 X FAB Silicon Foundries 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.

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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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.