Correlation Between CosmoSteel Holdings and WIMFARM SA

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

By analyzing existing cross correlation between CosmoSteel Holdings Limited and WIMFARM SA EO, you can compare the effects of market volatilities on CosmoSteel Holdings and WIMFARM SA 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 CosmoSteel Holdings with a short position of WIMFARM SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of CosmoSteel Holdings and WIMFARM SA.

Diversification Opportunities for CosmoSteel Holdings and WIMFARM SA

0.2

Correlation Coefficient

CosmoSteel Holdings  WIMFARM SA

Modest diversification

The 3 months correlation between CosmoSteel and WIMFARM is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding CosmoSteel Holdings Limited and WIMFARM SA EO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WIMFARM SA EO and CosmoSteel Holdings 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 CosmoSteel Holdings Limited are associated (or correlated) with WIMFARM SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WIMFARM SA EO has no effect on the direction of CosmoSteel Holdings i.e., CosmoSteel Holdings and WIMFARM SA go up and down completely randomly.

Pair Corralation between CosmoSteel Holdings and WIMFARM SA

Assuming the 90 days horizon CosmoSteel Holdings Limited is expected to generate 0.76 times more return on investment than WIMFARM SA. However, CosmoSteel Holdings Limited is 1.31 times less risky than WIMFARM SA. It trades about 0.1 of its potential returns per unit of risk. WIMFARM SA EO is currently generating about -0.03 per unit of risk. If you would invest  6.05  in CosmoSteel Holdings Limited on September 12, 2024 and sell it today you would earn a total of  1.10  from holding CosmoSteel Holdings Limited or generate 18.18% return on investment over 90 days.

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

CosmoSteel Holdings Limited  vs.  WIMFARM SA EO

CosmoSteel Holdings

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CosmoSteel Holdings Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CosmoSteel Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

WIMFARM SA EO

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WIMFARM SA EO has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with CosmoSteel Holdings and WIMFARM SA

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

The idea behind CosmoSteel Holdings Limited and WIMFARM SA EO 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.