Correlation Between COSMO Pharmaceuticals and Xlife Sciences

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

By analyzing existing cross correlation between COSMO Pharmaceuticals SA and Xlife Sciences AG, you can compare the effects of market volatilities on COSMO Pharmaceuticals and Xlife Sciences 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 COSMO Pharmaceuticals with a short position of Xlife Sciences. Check out your portfolio center. Please also check ongoing floating volatility patterns of COSMO Pharmaceuticals and Xlife Sciences.

Diversification Opportunities for COSMO Pharmaceuticals and Xlife Sciences

0.14

Correlation Coefficient

COSMO Pharmaceuticals  Xlife Sciences

Average diversification

The 3 months correlation between COSMO and Xlife is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding COSMO Pharmaceuticals SA and Xlife Sciences AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xlife Sciences AG and COSMO Pharmaceuticals 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 COSMO Pharmaceuticals SA are associated (or correlated) with Xlife Sciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xlife Sciences AG has no effect on the direction of COSMO Pharmaceuticals i.e., COSMO Pharmaceuticals and Xlife Sciences go up and down completely randomly.

Pair Corralation between COSMO Pharmaceuticals and Xlife Sciences

Assuming the 90 days trading horizon COSMO Pharmaceuticals SA is expected to under-perform the Xlife Sciences. But the stock apears to be less risky and, when comparing its historical volatility, COSMO Pharmaceuticals SA is 1.95 times less risky than Xlife Sciences. The stock trades about -0.07 of its potential returns per unit of risk. The Xlife Sciences AG is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  2,540  in Xlife Sciences AG on December 29, 2024 and sell it today you would lose (190.00) from holding Xlife Sciences AG or give up 7.48% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

COSMO Pharmaceuticals SA  vs.  Xlife Sciences AG

COSMO Pharmaceuticals

Risk-Adjusted Performance

Very Weak

Over the last 90 days COSMO Pharmaceuticals SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Xlife Sciences AG

Risk-Adjusted Performance

Very Weak

Over the last 90 days Xlife Sciences AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Xlife Sciences is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with COSMO Pharmaceuticals and Xlife Sciences

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

The idea behind COSMO Pharmaceuticals SA and Xlife Sciences AG 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.