Correlation Between Cogent Communications and AXWAY SOFTWARE

Can any of the company-specific risk be diversified away by investing in both Cogent Communications and AXWAY SOFTWARE 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 AXWAY SOFTWARE 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 AXWAY SOFTWARE EO, you can compare the effects of market volatilities on Cogent Communications and AXWAY SOFTWARE 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 AXWAY SOFTWARE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cogent Communications and AXWAY SOFTWARE.

Diversification Opportunities for Cogent Communications and AXWAY SOFTWARE

0.76

Correlation Coefficient

Cogent Communications  AXWAY SOFTWARE

Poor diversification

The 3 months correlation between Cogent and AXWAY is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Cogent Communications Holdings and AXWAY SOFTWARE EO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AXWAY SOFTWARE EO 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 AXWAY SOFTWARE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AXWAY SOFTWARE EO has no effect on the direction of Cogent Communications i.e., Cogent Communications and AXWAY SOFTWARE go up and down completely randomly.

Pair Corralation between Cogent Communications and AXWAY SOFTWARE

Assuming the 90 days trading horizon Cogent Communications Holdings is expected to generate 1.98 times more return on investment than AXWAY SOFTWARE. However, Cogent Communications is 1.98 times more volatile than AXWAY SOFTWARE EO. It trades about 0.01 of its potential returns per unit of risk. AXWAY SOFTWARE EO is currently generating about -0.08 per unit of risk. If you would invest  7,307  in Cogent Communications Holdings on September 17, 2024 and sell it today you would lose (7.00) from holding Cogent Communications Holdings or give up 0.1% of portfolio value over 90 days.

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

Cogent Communications Holdings  vs.  AXWAY SOFTWARE EO

Cogent Communications

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cogent Communications Holdings are ranked lower than 11 (%) 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.

AXWAY SOFTWARE EO

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AXWAY SOFTWARE EO are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, AXWAY SOFTWARE reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cogent Communications and AXWAY SOFTWARE

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

The idea behind Cogent Communications Holdings and AXWAY SOFTWARE EO 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.