Correlation Between Cogent Communications and CECO ENVIRONMENTAL

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

Diversification Opportunities for Cogent Communications and CECO ENVIRONMENTAL

0.21

Correlation Coefficient

Cogent Communications  CECO ENVIRONMENTAL

Modest diversification

The 3 months correlation between Cogent and CECO is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Cogent Communications Holdings and CECO ENVIRONMENTAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CECO ENVIRONMENTAL 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 CECO ENVIRONMENTAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CECO ENVIRONMENTAL has no effect on the direction of Cogent Communications i.e., Cogent Communications and CECO ENVIRONMENTAL go up and down completely randomly.

Pair Corralation between Cogent Communications and CECO ENVIRONMENTAL

Assuming the 90 days trading horizon Cogent Communications Holdings is expected to generate 0.69 times more return on investment than CECO ENVIRONMENTAL. However, Cogent Communications Holdings is 1.45 times less risky than CECO ENVIRONMENTAL. It trades about 0.14 of its potential returns per unit of risk. CECO ENVIRONMENTAL is currently generating about 0.04 per unit of risk. If you would invest  4,912  in Cogent Communications Holdings on September 30, 2024 and sell it today you would earn a total of  2,288  from holding Cogent Communications Holdings or generate 46.58% return on investment over 90 days.

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

Cogent Communications Holdings  vs.  CECO ENVIRONMENTAL

Cogent Communications

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cogent Communications Holdings are ranked lower than 5 (%) 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.

CECO ENVIRONMENTAL

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CECO ENVIRONMENTAL are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, CECO ENVIRONMENTAL unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cogent Communications and CECO ENVIRONMENTAL

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

The idea behind Cogent Communications Holdings and CECO ENVIRONMENTAL 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.