Correlation Between COSMO FIRST and Roto Pumps

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

Diversification Opportunities for COSMO FIRST and Roto Pumps

0.73

Correlation Coefficient

COSMO FIRST  Roto Pumps

Poor diversification

The 3 months correlation between COSMO and Roto is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding COSMO FIRST LIMITED and Roto Pumps Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roto Pumps Limited 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 Roto Pumps. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roto Pumps Limited has no effect on the direction of COSMO FIRST i.e., COSMO FIRST and Roto Pumps go up and down completely randomly.

Pair Corralation between COSMO FIRST and Roto Pumps

Assuming the 90 days trading horizon COSMO FIRST LIMITED is expected to generate 0.94 times more return on investment than Roto Pumps. However, COSMO FIRST LIMITED is 1.07 times less risky than Roto Pumps. It trades about 0.06 of its potential returns per unit of risk. Roto Pumps Limited is currently generating about 0.05 per unit of risk. If you would invest  78,344  in COSMO FIRST LIMITED on September 23, 2024 and sell it today you would earn a total of  17,061  from holding COSMO FIRST LIMITED or generate 21.78% return on investment over 90 days.

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

COSMO FIRST LIMITED  vs.  Roto Pumps Limited

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.

Roto Pumps Limited

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Roto Pumps Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Roto Pumps may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with COSMO FIRST and Roto Pumps

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

The idea behind COSMO FIRST LIMITED and Roto Pumps 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.