Correlation Between Cognios Market and Cognios Large

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

By analyzing existing cross correlation between Cognios Market Neutral and Cognios Large Cap, you can compare the effects of market volatilities on Cognios Market and Cognios Large 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 Cognios Market with a short position of Cognios Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cognios Market and Cognios Large.

Diversification Opportunities for Cognios Market and Cognios Large

-0.65

Correlation Coefficient

Cognios Market  Cognios Large

Excellent diversification

The 3 months correlation between Cognios and Cognios is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Cognios Market Neutral and Cognios Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cognios Large Cap and Cognios Market 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 Cognios Market Neutral are associated (or correlated) with Cognios Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cognios Large Cap has no effect on the direction of Cognios Market i.e., Cognios Market and Cognios Large go up and down completely randomly.

Pair Corralation between Cognios Market and Cognios Large

Assuming the 90 days horizon Cognios Market Neutral is expected to generate 0.09 times more return on investment than Cognios Large. However, Cognios Market Neutral is 10.63 times less risky than Cognios Large. It trades about -0.21 of its potential returns per unit of risk. Cognios Large Cap is currently generating about -0.23 per unit of risk. If you would invest  1,367  in Cognios Market Neutral on September 3, 2024 and sell it today you would lose (66.00) from holding Cognios Market Neutral or give up 4.83% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	31.25%
Values	Daily Returns

Cognios Market Neutral  vs.  Cognios Large Cap

Cognios Market Neutral

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cognios Market Neutral has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Cognios Market is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Cognios Large Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cognios Large Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Cognios Market and Cognios Large

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

The idea behind Cognios Market Neutral and Cognios Large Cap 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.