Correlation Between OLD MUTUAL and Cogent Communications

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

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

Diversification Opportunities for OLD MUTUAL and Cogent Communications

-0.52

Correlation Coefficient

OLD MUTUAL  Cogent Communications

Excellent diversification

The 3 months correlation between OLD and Cogent is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding OLD MUTUAL LTD and Cogent Communications Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cogent Communications and OLD MUTUAL 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 OLD MUTUAL LTD 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 OLD MUTUAL i.e., OLD MUTUAL and Cogent Communications go up and down completely randomly.

Pair Corralation between OLD MUTUAL and Cogent Communications

Assuming the 90 days horizon OLD MUTUAL LTD is expected to generate 2.19 times more return on investment than Cogent Communications. However, OLD MUTUAL is 2.19 times more volatile than Cogent Communications Holdings. It trades about 0.07 of its potential returns per unit of risk. Cogent Communications Holdings is currently generating about -0.04 per unit of risk. If you would invest  49.00  in OLD MUTUAL LTD on April 25, 2025 and sell it today you would earn a total of  8.00  from holding OLD MUTUAL LTD or generate 16.33% return on investment over 90 days.

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

OLD MUTUAL LTD  vs.  Cogent Communications Holdings

OLD MUTUAL LTD

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in OLD MUTUAL LTD are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, OLD MUTUAL reported solid returns over the last few months and may actually be approaching a breakup point.

Cogent Communications

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cogent Communications Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's primary indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with OLD MUTUAL and Cogent Communications

The main advantage of trading using opposite OLD MUTUAL and Cogent Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if OLD MUTUAL 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 OLD MUTUAL LTD and Cogent Communications Holdings 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.