Correlation Between COSMO FIRST and Mazagon Dock

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

Diversification Opportunities for COSMO FIRST and Mazagon Dock

0.87

Correlation Coefficient

COSMO FIRST  Mazagon Dock

Very poor diversification

The 3 months correlation between COSMO and Mazagon is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding COSMO FIRST LIMITED and Mazagon Dock Shipbuilders in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mazagon Dock Shipbuilders 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 Mazagon Dock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mazagon Dock Shipbuilders has no effect on the direction of COSMO FIRST i.e., COSMO FIRST and Mazagon Dock go up and down completely randomly.

Pair Corralation between COSMO FIRST and Mazagon Dock

Assuming the 90 days trading horizon COSMO FIRST LIMITED is expected to generate 0.98 times more return on investment than Mazagon Dock. However, COSMO FIRST LIMITED is 1.02 times less risky than Mazagon Dock. It trades about 0.13 of its potential returns per unit of risk. Mazagon Dock Shipbuilders is currently generating about 0.06 per unit of risk. If you would invest  76,975  in COSMO FIRST LIMITED on September 23, 2024 and sell it today you would earn a total of  18,430  from holding COSMO FIRST LIMITED or generate 23.94% return on investment over 90 days.

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

COSMO FIRST LIMITED  vs.  Mazagon Dock Shipbuilders

COSMO FIRST LIMITED

Risk-Adjusted Performance

9 of 100

OK

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

Mazagon Dock Shipbuilders

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Mazagon Dock Shipbuilders are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain basic indicators, Mazagon Dock may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with COSMO FIRST and Mazagon Dock

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

The idea behind COSMO FIRST LIMITED and Mazagon Dock Shipbuilders 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.