Correlation Between Cobalt Blue and Edison Cobalt

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

By analyzing existing cross correlation between Cobalt Blue Holdings and Edison Cobalt Corp, you can compare the effects of market volatilities on Cobalt Blue and Edison Cobalt 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 Cobalt Blue with a short position of Edison Cobalt. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cobalt Blue and Edison Cobalt.

Diversification Opportunities for Cobalt Blue and Edison Cobalt

0.26

Correlation Coefficient

Cobalt Blue  Edison Cobalt

Modest diversification

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

Pair Corralation between Cobalt Blue and Edison Cobalt

Assuming the 90 days horizon Cobalt Blue Holdings is expected to generate 2.64 times more return on investment than Edison Cobalt. However, Cobalt Blue is 2.64 times more volatile than Edison Cobalt Corp. It trades about 0.06 of its potential returns per unit of risk. Edison Cobalt Corp is currently generating about 0.03 per unit of risk. If you would invest  4.40  in Cobalt Blue Holdings on December 29, 2024 and sell it today you would earn a total of  0.06  from holding Cobalt Blue Holdings or generate 1.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.88%
Values	Daily Returns

Cobalt Blue Holdings  vs.  Edison Cobalt Corp

Cobalt Blue Holdings

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cobalt Blue Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical indicators, Cobalt Blue reported solid returns over the last few months and may actually be approaching a breakup point.

Edison Cobalt Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Edison Cobalt Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Edison Cobalt may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Cobalt Blue and Edison Cobalt

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

The idea behind Cobalt Blue Holdings and Edison Cobalt Corp 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.