Correlation Between Tips Music and COSMO FIRST

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

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

Diversification Opportunities for Tips Music and COSMO FIRST

-0.26

Correlation Coefficient

Tips Music  COSMO FIRST

Very good diversification

The 3 months correlation between Tips and COSMO is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Tips Music Limited and COSMO FIRST LIMITED in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COSMO FIRST LIMITED and Tips Music 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 Tips Music Limited are associated (or correlated) with COSMO FIRST. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COSMO FIRST LIMITED has no effect on the direction of Tips Music i.e., Tips Music and COSMO FIRST go up and down completely randomly.

Pair Corralation between Tips Music and COSMO FIRST

Assuming the 90 days trading horizon Tips Music Limited is expected to generate 1.27 times more return on investment than COSMO FIRST. However, Tips Music is 1.27 times more volatile than COSMO FIRST LIMITED. It trades about 0.11 of its potential returns per unit of risk. COSMO FIRST LIMITED is currently generating about 0.01 per unit of risk. If you would invest  73,569  in Tips Music Limited on September 1, 2024 and sell it today you would earn a total of  12,336  from holding Tips Music Limited or generate 16.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Tips Music Limited  vs.  COSMO FIRST LIMITED

Tips Music Limited

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tips Music Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Tips Music unveiled solid returns over the last few months and may actually be approaching a breakup point.

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 recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Tips Music and COSMO FIRST

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

The idea behind Tips Music Limited and COSMO FIRST 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.