Correlation Between Cogstate and Newtopia

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

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

Diversification Opportunities for Cogstate and Newtopia

0.46

Correlation Coefficient

Cogstate  Newtopia

Very weak diversification

The 3 months correlation between Cogstate and Newtopia is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Cogstate Limited and Newtopia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newtopia 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 Newtopia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newtopia has no effect on the direction of Cogstate i.e., Cogstate and Newtopia go up and down completely randomly.

Pair Corralation between Cogstate and Newtopia

Assuming the 90 days horizon Cogstate Limited is expected to generate 0.14 times more return on investment than Newtopia. However, Cogstate Limited is 7.35 times less risky than Newtopia. It trades about 0.1 of its potential returns per unit of risk. Newtopia is currently generating about -0.1 per unit of risk. If you would invest  57.00  in Cogstate Limited on September 3, 2024 and sell it today you would earn a total of  7.00  from holding Cogstate Limited or generate 12.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Cogstate Limited  vs.  Newtopia

Cogstate Limited

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cogstate Limited are ranked lower than 7 (%) 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.

Newtopia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Newtopia has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Cogstate and Newtopia

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

The idea behind Cogstate Limited and Newtopia 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.