Correlation Between Fiserv and Cogent Communications

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

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

Diversification Opportunities for Fiserv and Cogent Communications

0.86

Correlation Coefficient

Fiserv  Cogent Communications

Very poor diversification

The 3 months correlation between Fiserv and Cogent is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Fiserv Inc and Cogent Communications Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cogent Communications and Fiserv 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 Fiserv Inc 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 Fiserv i.e., Fiserv and Cogent Communications go up and down completely randomly.

Pair Corralation between Fiserv and Cogent Communications

Assuming the 90 days horizon Fiserv Inc is expected to generate 0.94 times more return on investment than Cogent Communications. However, Fiserv Inc is 1.07 times less risky than Cogent Communications. It trades about 0.2 of its potential returns per unit of risk. Cogent Communications Holdings is currently generating about 0.15 per unit of risk. If you would invest  15,698  in Fiserv Inc on September 18, 2024 and sell it today you would earn a total of  3,876  from holding Fiserv Inc or generate 24.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.46%
Values	Daily Returns

Fiserv Inc  vs.  Cogent Communications Holdings

Fiserv Inc

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fiserv Inc are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Fiserv reported solid returns over the last few months and may actually be approaching a breakup point.

Cogent Communications

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cogent Communications Holdings are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Cogent Communications reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fiserv and Cogent Communications

The main advantage of trading using opposite Fiserv and Cogent Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fiserv 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 Fiserv Inc 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.