Correlation Between Alkali Metals and COSMO FIRST

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

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

Diversification Opportunities for Alkali Metals and COSMO FIRST

-0.06

Correlation Coefficient

Alkali Metals  COSMO FIRST

Good diversification

The 3 months correlation between Alkali and COSMO is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Alkali Metals 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 Alkali Metals 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 Alkali Metals 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 Alkali Metals i.e., Alkali Metals and COSMO FIRST go up and down completely randomly.

Pair Corralation between Alkali Metals and COSMO FIRST

Assuming the 90 days trading horizon Alkali Metals Limited is expected to under-perform the COSMO FIRST. In addition to that, Alkali Metals is 1.16 times more volatile than COSMO FIRST LIMITED. It trades about 0.0 of its total potential returns per unit of risk. COSMO FIRST LIMITED is currently generating about 0.03 per unit of volatility. If you would invest  71,825  in COSMO FIRST LIMITED on October 4, 2024 and sell it today you would earn a total of  20,050  from holding COSMO FIRST LIMITED or generate 27.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.79%
Values	Daily Returns

Alkali Metals Limited  vs.  COSMO FIRST LIMITED

Alkali Metals Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alkali Metals Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Alkali Metals is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

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 weak basic indicators, COSMO FIRST demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alkali Metals and COSMO FIRST

The main advantage of trading using opposite Alkali Metals and COSMO FIRST positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alkali Metals 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 Alkali Metals 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.

Check out your portfolio center.

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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.