Correlation Between PESTECH International and Cosmos Technology

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

By analyzing existing cross correlation between PESTECH International Bhd and Cosmos Technology International, you can compare the effects of market volatilities on PESTECH International and Cosmos 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 PESTECH International with a short position of Cosmos Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of PESTECH International and Cosmos Technology.

Diversification Opportunities for PESTECH International and Cosmos Technology

0.39

Correlation Coefficient

PESTECH International  Cosmos Technology

Weak diversification

The 3 months correlation between PESTECH and Cosmos is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding PESTECH International Bhd and Cosmos Technology Internationa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cosmos Technology and PESTECH International 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 PESTECH International Bhd are associated (or correlated) with Cosmos Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cosmos Technology has no effect on the direction of PESTECH International i.e., PESTECH International and Cosmos Technology go up and down completely randomly.

Pair Corralation between PESTECH International and Cosmos Technology

Assuming the 90 days trading horizon PESTECH International Bhd is expected to generate 2.01 times more return on investment than Cosmos Technology. However, PESTECH International is 2.01 times more volatile than Cosmos Technology International. It trades about 0.05 of its potential returns per unit of risk. Cosmos Technology International is currently generating about 0.05 per unit of risk. If you would invest  13.00  in PESTECH International Bhd on September 18, 2024 and sell it today you would earn a total of  1.00  from holding PESTECH International Bhd or generate 7.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

PESTECH International Bhd  vs.  Cosmos Technology Internationa

PESTECH International Bhd

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PESTECH International Bhd are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, PESTECH International disclosed solid returns over the last few months and may actually be approaching a breakup point.

Cosmos Technology

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cosmos Technology International are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Cosmos Technology may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with PESTECH International and Cosmos Technology

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

The idea behind PESTECH International Bhd and Cosmos Technology International 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.