Correlation Between CosmoSteel Holdings and Whirlpool

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

Diversification Opportunities for CosmoSteel Holdings and Whirlpool

0.43

Correlation Coefficient

CosmoSteel Holdings  Whirlpool

Very weak diversification

The 3 months correlation between CosmoSteel and Whirlpool is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding CosmoSteel Holdings Limited and Whirlpool in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Whirlpool 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 Whirlpool. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Whirlpool has no effect on the direction of CosmoSteel Holdings i.e., CosmoSteel Holdings and Whirlpool go up and down completely randomly.

Pair Corralation between CosmoSteel Holdings and Whirlpool

Assuming the 90 days horizon CosmoSteel Holdings is expected to generate 2.98 times less return on investment than Whirlpool. In addition to that, CosmoSteel Holdings is 1.07 times more volatile than Whirlpool. It trades about 0.01 of its total potential returns per unit of risk. Whirlpool is currently generating about 0.03 per unit of volatility. If you would invest  9,667  in Whirlpool on September 27, 2024 and sell it today you would earn a total of  1,303  from holding Whirlpool or generate 13.48% return on investment over 90 days.

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

CosmoSteel Holdings Limited  vs.  Whirlpool

CosmoSteel Holdings

Risk-Adjusted Performance

3 of 100

Weak

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

Whirlpool

Risk-Adjusted Performance

9 of 100

OK

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

Pair Trading with CosmoSteel Holdings and Whirlpool

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

The idea behind CosmoSteel Holdings Limited and Whirlpool 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.