Correlation Between COSMO FIRST and California Software

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

By analyzing existing cross correlation between COSMO FIRST LIMITED and California Software, you can compare the effects of market volatilities on COSMO FIRST and California Software 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 FIRST with a short position of California Software. Check out your portfolio center. Please also check ongoing floating volatility patterns of COSMO FIRST and California Software.

Diversification Opportunities for COSMO FIRST and California Software

-0.62

Correlation Coefficient

COSMO FIRST  California Software

Excellent diversification

The 3 months correlation between COSMO and California is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding COSMO FIRST LIMITED and California Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on California Software and COSMO FIRST 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 FIRST LIMITED are associated (or correlated) with California Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of California Software has no effect on the direction of COSMO FIRST i.e., COSMO FIRST and California Software go up and down completely randomly.

Pair Corralation between COSMO FIRST and California Software

Assuming the 90 days trading horizon COSMO FIRST LIMITED is expected to generate 2.2 times more return on investment than California Software. However, COSMO FIRST is 2.2 times more volatile than California Software. It trades about 0.11 of its potential returns per unit of risk. California Software is currently generating about 0.09 per unit of risk. If you would invest  89,900  in COSMO FIRST LIMITED on October 11, 2024 and sell it today you would earn a total of  8,140  from holding COSMO FIRST LIMITED or generate 9.05% return on investment over 90 days.

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

COSMO FIRST LIMITED  vs.  California Software

COSMO FIRST LIMITED

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in COSMO FIRST LIMITED are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain basic indicators, COSMO FIRST demonstrated solid returns over the last few months and may actually be approaching a breakup point.

California Software

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days California Software has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, California Software is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with COSMO FIRST and California Software

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

The idea behind COSMO FIRST LIMITED and California Software 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.