Correlation Between COWINTECH and SP Systems

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

By analyzing existing cross correlation between COWINTECH Co and SP Systems CoLtd, you can compare the effects of market volatilities on COWINTECH and SP Systems 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 COWINTECH with a short position of SP Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of COWINTECH and SP Systems.

Diversification Opportunities for COWINTECH and SP Systems

0.23

Correlation Coefficient

COWINTECH  SP Systems

Modest diversification

The 3 months correlation between COWINTECH and 317830 is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding COWINTECH Co and SP Systems CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SP Systems CoLtd and COWINTECH 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 COWINTECH Co are associated (or correlated) with SP Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SP Systems CoLtd has no effect on the direction of COWINTECH i.e., COWINTECH and SP Systems go up and down completely randomly.

Pair Corralation between COWINTECH and SP Systems

Assuming the 90 days trading horizon COWINTECH Co is expected to generate 1.12 times more return on investment than SP Systems. However, COWINTECH is 1.12 times more volatile than SP Systems CoLtd. It trades about -0.07 of its potential returns per unit of risk. SP Systems CoLtd is currently generating about -0.09 per unit of risk. If you would invest  2,592,613  in COWINTECH Co on September 4, 2024 and sell it today you would lose (1,227,613) from holding COWINTECH Co or give up 47.35% of portfolio value over 90 days.

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

COWINTECH Co  vs.  SP Systems CoLtd

COWINTECH

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days COWINTECH Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, COWINTECH is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

SP Systems CoLtd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SP Systems CoLtd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with COWINTECH and SP Systems

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

The idea behind COWINTECH Co and SP Systems CoLtd 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.