Correlation Between California Software and COSMO FIRST

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

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

Diversification Opportunities for California Software and COSMO FIRST

-0.42

Correlation Coefficient

California Software  COSMO FIRST

Very good diversification

The 3 months correlation between California and COSMO is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding California Software 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 California Software 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 California Software 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 California Software i.e., California Software and COSMO FIRST go up and down completely randomly.

Pair Corralation between California Software and COSMO FIRST

Assuming the 90 days trading horizon California Software is expected to under-perform the COSMO FIRST. In addition to that, California Software is 1.59 times more volatile than COSMO FIRST LIMITED. It trades about -0.03 of its total potential returns per unit of risk. COSMO FIRST LIMITED is currently generating about 0.06 per unit of volatility. If you would invest  73,370  in COSMO FIRST LIMITED on October 25, 2024 and sell it today you would earn a total of  7,955  from holding COSMO FIRST LIMITED or generate 10.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

California Software  vs.  COSMO FIRST LIMITED

California Software

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days California Software 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.

COSMO FIRST LIMITED

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in COSMO FIRST LIMITED are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, COSMO FIRST demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with California Software and COSMO FIRST

The main advantage of trading using opposite California Software and COSMO FIRST positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if California Software 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 California Software 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.