Correlation Between Cogent Communications and Fair Isaac

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

Diversification Opportunities for Cogent Communications and Fair Isaac

0.82

Correlation Coefficient

Cogent Communications  Fair Isaac

Very poor diversification

The 3 months correlation between Cogent and Fair is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Cogent Communications Holdings and Fair Isaac Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fair Isaac Corp 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 Fair Isaac. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fair Isaac Corp has no effect on the direction of Cogent Communications i.e., Cogent Communications and Fair Isaac go up and down completely randomly.

Pair Corralation between Cogent Communications and Fair Isaac

Assuming the 90 days trading horizon Cogent Communications is expected to generate 11.66 times less return on investment than Fair Isaac. But when comparing it to its historical volatility, Cogent Communications Holdings is 10.91 times less risky than Fair Isaac. It trades about 0.06 of its potential returns per unit of risk. Fair Isaac Corp is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  72,000  in Fair Isaac Corp on September 1, 2024 and sell it today you would earn a total of  154,500  from holding Fair Isaac Corp or generate 214.58% return on investment over 90 days.

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

Cogent Communications Holdings  vs.  Fair Isaac Corp

Cogent Communications

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cogent Communications Holdings are ranked lower than 15 (%) 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.

Fair Isaac Corp

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fair Isaac Corp are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Fair Isaac unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cogent Communications and Fair Isaac

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

The idea behind Cogent Communications Holdings and Fair Isaac Corp 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.