Correlation Between Aston Martin and Kosmos Energy

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

By analyzing existing cross correlation between Aston Martin Lagonda and Kosmos Energy, you can compare the effects of market volatilities on Aston Martin and Kosmos Energy 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 Aston Martin with a short position of Kosmos Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aston Martin and Kosmos Energy.

Diversification Opportunities for Aston Martin and Kosmos Energy

0.47

Correlation Coefficient

Aston Martin  Kosmos Energy

Very weak diversification

The 3 months correlation between Aston and Kosmos is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Aston Martin Lagonda and Kosmos Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kosmos Energy and Aston Martin 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 Aston Martin Lagonda are associated (or correlated) with Kosmos Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kosmos Energy has no effect on the direction of Aston Martin i.e., Aston Martin and Kosmos Energy go up and down completely randomly.

Pair Corralation between Aston Martin and Kosmos Energy

Assuming the 90 days horizon Aston Martin Lagonda is expected to under-perform the Kosmos Energy. But the pink sheet apears to be less risky and, when comparing its historical volatility, Aston Martin Lagonda is 1.9 times less risky than Kosmos Energy. The pink sheet trades about -0.12 of its potential returns per unit of risk. The Kosmos Energy is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  362.00  in Kosmos Energy on October 9, 2024 and sell it today you would earn a total of  17.00  from holding Kosmos Energy or generate 4.7% return on investment over 90 days.

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

Aston Martin Lagonda  vs.  Kosmos Energy

Aston Martin Lagonda

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aston Martin Lagonda has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Kosmos Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kosmos Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Aston Martin and Kosmos Energy

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

The idea behind Aston Martin Lagonda and Kosmos Energy 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.