Correlation Between Cogent Communications and Microchip Technology

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

Diversification Opportunities for Cogent Communications and Microchip Technology

-0.55

Correlation Coefficient

Cogent Communications  Microchip Technology

Excellent diversification

The 3 months correlation between Cogent and Microchip is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Cogent Communications Holdings and Microchip Technology Incorpora in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microchip Technology 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 Microchip Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microchip Technology has no effect on the direction of Cogent Communications i.e., Cogent Communications and Microchip Technology go up and down completely randomly.

Pair Corralation between Cogent Communications and Microchip Technology

Assuming the 90 days trading horizon Cogent Communications is expected to generate 18.2 times less return on investment than Microchip Technology. But when comparing it to its historical volatility, Cogent Communications Holdings is 1.41 times less risky than Microchip Technology. It trades about 0.02 of its potential returns per unit of risk. Microchip Technology Incorporated is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  3,633  in Microchip Technology Incorporated on April 23, 2025 and sell it today you would earn a total of  2,774  from holding Microchip Technology Incorporated or generate 76.36% return on investment over 90 days.

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

Cogent Communications Holdings  vs.  Microchip Technology Incorpora

Cogent Communications

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cogent Communications Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable primary indicators, Cogent Communications is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Microchip Technology

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Microchip Technology Incorporated are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Microchip Technology reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cogent Communications and Microchip Technology

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

The idea behind Cogent Communications Holdings and Microchip Technology Incorporated 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.