Correlation Between Telenor ASA and Cogent Communications

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

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

Diversification Opportunities for Telenor ASA and Cogent Communications

-0.43

Correlation Coefficient

Telenor ASA  Cogent Communications

Very good diversification

The 3 months correlation between Telenor and Cogent is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Telenor ASA ADR and Cogent Communications Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cogent Communications and Telenor ASA 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 Telenor ASA ADR 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 Telenor ASA i.e., Telenor ASA and Cogent Communications go up and down completely randomly.

Pair Corralation between Telenor ASA and Cogent Communications

Assuming the 90 days horizon Telenor ASA ADR is expected to under-perform the Cogent Communications. But the pink sheet apears to be less risky and, when comparing its historical volatility, Telenor ASA ADR is 1.18 times less risky than Cogent Communications. The pink sheet trades about -0.11 of its potential returns per unit of risk. The Cogent Communications Group is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  6,989  in Cogent Communications Group on September 14, 2024 and sell it today you would earn a total of  554.00  from holding Cogent Communications Group or generate 7.93% return on investment over 90 days.

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

Telenor ASA ADR  vs.  Cogent Communications Group

Telenor ASA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Telenor ASA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Cogent Communications

Risk-Adjusted Performance

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cogent Communications Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Cogent Communications may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Telenor ASA and Cogent Communications

The main advantage of trading using opposite Telenor ASA and Cogent Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telenor ASA 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 Telenor ASA ADR and Cogent Communications Group 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.