Correlation Between COSMO FIRST and Hindustan Foods

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

Diversification Opportunities for COSMO FIRST and Hindustan Foods

0.04

Correlation Coefficient

COSMO FIRST  Hindustan Foods

Significant diversification

The 3 months correlation between COSMO and Hindustan is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding COSMO FIRST LIMITED and Hindustan Foods Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hindustan Foods 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 Hindustan Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hindustan Foods has no effect on the direction of COSMO FIRST i.e., COSMO FIRST and Hindustan Foods go up and down completely randomly.

Pair Corralation between COSMO FIRST and Hindustan Foods

Assuming the 90 days trading horizon COSMO FIRST LIMITED is expected to generate 0.87 times more return on investment than Hindustan Foods. However, COSMO FIRST LIMITED is 1.15 times less risky than Hindustan Foods. It trades about 0.01 of its potential returns per unit of risk. Hindustan Foods Limited is currently generating about -0.01 per unit of risk. If you would invest  78,080  in COSMO FIRST LIMITED on September 2, 2024 and sell it today you would earn a total of  80.00  from holding COSMO FIRST LIMITED or generate 0.1% return on investment over 90 days.

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

COSMO FIRST LIMITED  vs.  Hindustan Foods Limited

COSMO FIRST LIMITED

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days COSMO FIRST LIMITED has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, COSMO FIRST is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Hindustan Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hindustan Foods Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Hindustan Foods is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with COSMO FIRST and Hindustan Foods

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

The idea behind COSMO FIRST LIMITED and Hindustan Foods 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.

Check out your portfolio center.

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.