Correlation Between CosmoSteel Holdings and Companhia

Can any of the company-specific risk be diversified away by investing in both CosmoSteel Holdings and Companhia 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 Companhia 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 Companhia de Saneamento, you can compare the effects of market volatilities on CosmoSteel Holdings and Companhia 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 Companhia. Check out your portfolio center. Please also check ongoing floating volatility patterns of CosmoSteel Holdings and Companhia.

Diversification Opportunities for CosmoSteel Holdings and Companhia

-0.64

Correlation Coefficient

CosmoSteel Holdings  Companhia

Excellent diversification

The 3 months correlation between CosmoSteel and Companhia is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding CosmoSteel Holdings Limited and Companhia de Saneamento in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Companhia de Saneamento 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 Companhia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Companhia de Saneamento has no effect on the direction of CosmoSteel Holdings i.e., CosmoSteel Holdings and Companhia go up and down completely randomly.

Pair Corralation between CosmoSteel Holdings and Companhia

Assuming the 90 days horizon CosmoSteel Holdings Limited is expected to generate 1.62 times more return on investment than Companhia. However, CosmoSteel Holdings is 1.62 times more volatile than Companhia de Saneamento. It trades about 0.03 of its potential returns per unit of risk. Companhia de Saneamento is currently generating about -0.03 per unit of risk. If you would invest  6.45  in CosmoSteel Holdings Limited on October 4, 2024 and sell it today you would earn a total of  0.15  from holding CosmoSteel Holdings Limited or generate 2.33% return on investment over 90 days.

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

CosmoSteel Holdings Limited  vs.  Companhia de Saneamento

CosmoSteel Holdings

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CosmoSteel Holdings Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, CosmoSteel Holdings is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Companhia de Saneamento

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Companhia de Saneamento has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward-looking indicators, Companhia is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with CosmoSteel Holdings and Companhia

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

The idea behind CosmoSteel Holdings Limited and Companhia de Saneamento 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.