Correlation Between Cogent Communications and Gladstone Investment

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

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

Diversification Opportunities for Cogent Communications and Gladstone Investment

0.74

Correlation Coefficient

Cogent Communications  Gladstone Investment

Poor diversification

The 3 months correlation between Cogent and Gladstone is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Cogent Communications Holdings and Gladstone Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gladstone Investment and Cogent Communications 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 Cogent Communications Holdings are associated (or correlated) with Gladstone Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gladstone Investment has no effect on the direction of Cogent Communications i.e., Cogent Communications and Gladstone Investment go up and down completely randomly.

Pair Corralation between Cogent Communications and Gladstone Investment

Assuming the 90 days trading horizon Cogent Communications Holdings is expected to generate 1.34 times more return on investment than Gladstone Investment. However, Cogent Communications is 1.34 times more volatile than Gladstone Investment. It trades about 0.05 of its potential returns per unit of risk. Gladstone Investment is currently generating about 0.05 per unit of risk. If you would invest  4,808  in Cogent Communications Holdings on September 24, 2024 and sell it today you would earn a total of  2,492  from holding Cogent Communications Holdings or generate 51.83% return on investment over 90 days.

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

Cogent Communications Holdings  vs.  Gladstone Investment

Cogent Communications

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cogent Communications Holdings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Cogent Communications may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Gladstone Investment

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Gladstone Investment are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Gladstone Investment may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Cogent Communications and Gladstone Investment

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

The idea behind Cogent Communications Holdings and Gladstone Investment 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.