Correlation Between COSMO FIRST and MIC Electronics

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

Diversification Opportunities for COSMO FIRST and MIC Electronics

-0.21

Correlation Coefficient

COSMO FIRST  MIC Electronics

Very good diversification

The 3 months correlation between COSMO and MIC is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding COSMO FIRST LIMITED and MIC Electronics Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MIC Electronics 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 MIC Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MIC Electronics has no effect on the direction of COSMO FIRST i.e., COSMO FIRST and MIC Electronics go up and down completely randomly.

Pair Corralation between COSMO FIRST and MIC Electronics

Assuming the 90 days trading horizon COSMO FIRST LIMITED is expected to generate 1.15 times more return on investment than MIC Electronics. However, COSMO FIRST is 1.15 times more volatile than MIC Electronics Limited. It trades about 0.11 of its potential returns per unit of risk. MIC Electronics Limited is currently generating about -0.08 per unit of risk. If you would invest  76,405  in COSMO FIRST LIMITED on September 26, 2024 and sell it today you would earn a total of  15,920  from holding COSMO FIRST LIMITED or generate 20.84% return on investment over 90 days.

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

COSMO FIRST LIMITED  vs.  MIC Electronics Limited

COSMO FIRST LIMITED

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in COSMO FIRST LIMITED are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain basic indicators, COSMO FIRST demonstrated solid returns over the last few months and may actually be approaching a breakup point.

MIC Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MIC Electronics Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with COSMO FIRST and MIC Electronics

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

The idea behind COSMO FIRST LIMITED and MIC Electronics 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 Transaction History module to view history of all your transactions and understand their impact on performance.