Correlation Between Cosmos Technology and KL Technology

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

By analyzing existing cross correlation between Cosmos Technology International and KL Technology, you can compare the effects of market volatilities on Cosmos Technology and KL Technology 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 Cosmos Technology with a short position of KL Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cosmos Technology and KL Technology.

Diversification Opportunities for Cosmos Technology and KL Technology

0.69

Correlation Coefficient

Cosmos Technology  KL Technology

Poor diversification

The 3 months correlation between Cosmos and KLTE is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Cosmos Technology Internationa and KL Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KL Technology and Cosmos Technology 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 Cosmos Technology International are associated (or correlated) with KL Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KL Technology has no effect on the direction of Cosmos Technology i.e., Cosmos Technology and KL Technology go up and down completely randomly.

Pair Corralation between Cosmos Technology and KL Technology

Assuming the 90 days trading horizon Cosmos Technology International is expected to generate 1.86 times more return on investment than KL Technology. However, Cosmos Technology is 1.86 times more volatile than KL Technology. It trades about 0.32 of its potential returns per unit of risk. KL Technology is currently generating about 0.28 per unit of risk. If you would invest  37.00  in Cosmos Technology International on September 25, 2024 and sell it today you would earn a total of  5.00  from holding Cosmos Technology International or generate 13.51% return on investment over 90 days.

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

Cosmos Technology Internationa  vs.  KL Technology

Pair Trading with Cosmos Technology and KL Technology

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

The idea behind Cosmos Technology International and KL Technology 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.