Correlation Between Cogstate and M3

Can any of the company-specific risk be diversified away by investing in both Cogstate and M3 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 Cogstate and M3 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cogstate Limited and M3 Inc, you can compare the effects of market volatilities on Cogstate and M3 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 Cogstate with a short position of M3. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cogstate and M3.

Diversification Opportunities for Cogstate and M3

0.81

Correlation Coefficient

Cogstate  M3

Very poor diversification

The 3 months correlation between Cogstate and M3 is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Cogstate Limited and M3 Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on M3 Inc and Cogstate 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 Cogstate Limited are associated (or correlated) with M3. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of M3 Inc has no effect on the direction of Cogstate i.e., Cogstate and M3 go up and down completely randomly.

Pair Corralation between Cogstate and M3

Assuming the 90 days horizon Cogstate Limited is expected to generate 0.85 times more return on investment than M3. However, Cogstate Limited is 1.18 times less risky than M3. It trades about 0.23 of its potential returns per unit of risk. M3 Inc is currently generating about 0.16 per unit of risk. If you would invest  63.00  in Cogstate Limited on December 28, 2024 and sell it today you would earn a total of  26.00  from holding Cogstate Limited or generate 41.27% return on investment over 90 days.

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

Cogstate Limited  vs.  M3 Inc

Cogstate Limited

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cogstate Limited are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Cogstate reported solid returns over the last few months and may actually be approaching a breakup point.

M3 Inc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in M3 Inc are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, M3 showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cogstate and M3

The main advantage of trading using opposite Cogstate and M3 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cogstate position performs unexpectedly, M3 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 M3 will offset losses from the drop in M3's long position.

The idea behind Cogstate Limited and M3 Inc 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.