Correlation Between COSMO FIRST and General Insurance

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

By analyzing existing cross correlation between COSMO FIRST LIMITED and General Insurance, you can compare the effects of market volatilities on COSMO FIRST and General Insurance 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 COSMO FIRST with a short position of General Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of COSMO FIRST and General Insurance.

Diversification Opportunities for COSMO FIRST and General Insurance

0.69

Correlation Coefficient

COSMO FIRST  General Insurance

Poor diversification

The 3 months correlation between COSMO and General is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding COSMO FIRST LIMITED and General Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Insurance and COSMO FIRST 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 COSMO FIRST LIMITED are associated (or correlated) with General Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Insurance has no effect on the direction of COSMO FIRST i.e., COSMO FIRST and General Insurance go up and down completely randomly.

Pair Corralation between COSMO FIRST and General Insurance

Assuming the 90 days trading horizon COSMO FIRST is expected to generate 1.53 times less return on investment than General Insurance. In addition to that, COSMO FIRST is 1.12 times more volatile than General Insurance. It trades about 0.04 of its total potential returns per unit of risk. General Insurance is currently generating about 0.08 per unit of volatility. If you would invest  39,500  in General Insurance on September 14, 2024 and sell it today you would earn a total of  3,545  from holding General Insurance or generate 8.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

COSMO FIRST LIMITED  vs.  General Insurance

COSMO FIRST LIMITED

Risk-Adjusted Performance

3 of 100

Weak

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

General Insurance

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in General Insurance are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, General Insurance may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with COSMO FIRST and General Insurance

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

The idea behind COSMO FIRST LIMITED and General Insurance 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.