Correlation Between Cosmos Group and Zip Co

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

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

Diversification Opportunities for Cosmos Group and Zip Co

-0.36

Correlation Coefficient

Cosmos Group  Zip Co

Very good diversification

The 3 months correlation between Cosmos and Zip is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Cosmos Group Holdings and Zip Co Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zip Co Limited and Cosmos Group 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 Cosmos Group Holdings are associated (or correlated) with Zip Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zip Co Limited has no effect on the direction of Cosmos Group i.e., Cosmos Group and Zip Co go up and down completely randomly.

Pair Corralation between Cosmos Group and Zip Co

Given the investment horizon of 90 days Cosmos Group Holdings is expected to generate 52.26 times more return on investment than Zip Co. However, Cosmos Group is 52.26 times more volatile than Zip Co Limited. It trades about 0.23 of its potential returns per unit of risk. Zip Co Limited is currently generating about 0.14 per unit of risk. If you would invest  0.00  in Cosmos Group Holdings on September 5, 2024 and sell it today you would earn a total of  0.00  from holding Cosmos Group Holdings or generate 0.0% return on investment over 90 days.

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

Cosmos Group Holdings  vs.  Zip Co Limited

Cosmos Group Holdings

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cosmos Group Holdings are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Cosmos Group reported solid returns over the last few months and may actually be approaching a breakup point.

Zip Co Limited

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zip Co Limited are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, Zip Co reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cosmos Group and Zip Co

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

The idea behind Cosmos Group Holdings and Zip Co 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.