Correlation Between CosmoSteel Holdings and Computershare

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

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

Diversification Opportunities for CosmoSteel Holdings and Computershare

0.37

Correlation Coefficient

CosmoSteel Holdings  Computershare

Weak diversification

The 3 months correlation between CosmoSteel and Computershare is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding CosmoSteel Holdings Limited and Computershare Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Computershare Limited and CosmoSteel Holdings 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 CosmoSteel Holdings Limited are associated (or correlated) with Computershare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Computershare Limited has no effect on the direction of CosmoSteel Holdings i.e., CosmoSteel Holdings and Computershare go up and down completely randomly.

Pair Corralation between CosmoSteel Holdings and Computershare

Assuming the 90 days horizon CosmoSteel Holdings is expected to generate 2.76 times less return on investment than Computershare. In addition to that, CosmoSteel Holdings is 1.45 times more volatile than Computershare Limited. It trades about 0.03 of its total potential returns per unit of risk. Computershare Limited is currently generating about 0.11 per unit of volatility. If you would invest  1,571  in Computershare Limited on September 28, 2024 and sell it today you would earn a total of  449.00  from holding Computershare Limited or generate 28.58% return on investment over 90 days.

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

CosmoSteel Holdings Limited  vs.  Computershare Limited

CosmoSteel Holdings

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CosmoSteel Holdings Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, CosmoSteel Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Computershare Limited

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Computershare Limited are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Computershare reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CosmoSteel Holdings and Computershare

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

The idea behind CosmoSteel Holdings Limited and Computershare 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.