Correlation Between Cognex and Postal Savings

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

By analyzing existing cross correlation between Cognex and Postal Savings Bank, you can compare the effects of market volatilities on Cognex and Postal Savings 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 Cognex with a short position of Postal Savings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cognex and Postal Savings.

Diversification Opportunities for Cognex and Postal Savings

-0.19

Correlation Coefficient

Cognex  Postal Savings

Good diversification

The 3 months correlation between Cognex and Postal is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Cognex and Postal Savings Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Postal Savings Bank and Cognex 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 Cognex are associated (or correlated) with Postal Savings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Postal Savings Bank has no effect on the direction of Cognex i.e., Cognex and Postal Savings go up and down completely randomly.

Pair Corralation between Cognex and Postal Savings

Assuming the 90 days horizon Cognex is expected to under-perform the Postal Savings. But the stock apears to be less risky and, when comparing its historical volatility, Cognex is 2.77 times less risky than Postal Savings. The stock trades about 0.0 of its potential returns per unit of risk. The Postal Savings Bank is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  39.00  in Postal Savings Bank on September 30, 2024 and sell it today you would earn a total of  16.00  from holding Postal Savings Bank or generate 41.03% return on investment over 90 days.

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

Cognex  vs.  Postal Savings Bank

Cognex

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cognex has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Cognex is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Postal Savings Bank

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Postal Savings Bank are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Postal Savings reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cognex and Postal Savings

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

The idea behind Cognex and Postal Savings Bank 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.