Correlation Between Cogent Communications and Guangdong Investment

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

Diversification Opportunities for Cogent Communications and Guangdong Investment

-0.31

Correlation Coefficient

Cogent Communications  Guangdong Investment

Very good diversification

The 3 months correlation between Cogent and Guangdong is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Cogent Communications Holdings and Guangdong Investment Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Investment 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 Guangdong Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangdong Investment has no effect on the direction of Cogent Communications i.e., Cogent Communications and Guangdong Investment go up and down completely randomly.

Pair Corralation between Cogent Communications and Guangdong Investment

Assuming the 90 days trading horizon Cogent Communications Holdings is expected to under-perform the Guangdong Investment. In addition to that, Cogent Communications is 1.31 times more volatile than Guangdong Investment Limited. It trades about -0.05 of its total potential returns per unit of risk. Guangdong Investment Limited is currently generating about 0.07 per unit of volatility. If you would invest  68.00  in Guangdong Investment Limited on April 24, 2025 and sell it today you would earn a total of  6.00  from holding Guangdong Investment Limited or generate 8.82% return on investment over 90 days.

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

Cogent Communications Holdings  vs.  Guangdong Investment Limited

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.

Guangdong Investment

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Guangdong Investment Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Guangdong Investment may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Cogent Communications and Guangdong Investment

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

The idea behind Cogent Communications Holdings and Guangdong Investment Limited 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.