Correlation Between Cogent Communications and T Mobile

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

By analyzing existing cross correlation between Cogent Communications Group and T Mobile, you can compare the effects of market volatilities on Cogent Communications and T Mobile 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 T Mobile. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cogent Communications and T Mobile.

Diversification Opportunities for Cogent Communications and T Mobile

0.83

Correlation Coefficient

Cogent Communications  T Mobile

Very poor diversification

The 3 months correlation between Cogent and TMUS is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Cogent Communications Group and T Mobile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on T Mobile 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 Group are associated (or correlated) with T Mobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of T Mobile has no effect on the direction of Cogent Communications i.e., Cogent Communications and T Mobile go up and down completely randomly.

Pair Corralation between Cogent Communications and T Mobile

Given the investment horizon of 90 days Cogent Communications is expected to generate 2.68 times less return on investment than T Mobile. In addition to that, Cogent Communications is 1.27 times more volatile than T Mobile. It trades about 0.06 of its total potential returns per unit of risk. T Mobile is currently generating about 0.22 per unit of volatility. If you would invest  19,694  in T Mobile on August 18, 2024 and sell it today you would earn a total of  3,867  from holding T Mobile or generate 19.64% return on investment over 90 days.

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

Cogent Communications Group  vs.  T Mobile

Cogent Communications

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cogent Communications Group are ranked lower than 5 (%) 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 December 2024.

T Mobile

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in T Mobile are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, T Mobile unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cogent Communications and T Mobile

The main advantage of trading using opposite Cogent Communications and T Mobile positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cogent Communications position performs unexpectedly, T Mobile 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 T Mobile will offset losses from the drop in T Mobile's long position.

The idea behind Cogent Communications Group and T Mobile 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.