Correlation Between COSMO FIRST and City Union

Can any of the company-specific risk be diversified away by investing in both COSMO FIRST and City Union 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 City Union 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 City Union Bank, you can compare the effects of market volatilities on COSMO FIRST and City Union 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 City Union. Check out your portfolio center. Please also check ongoing floating volatility patterns of COSMO FIRST and City Union.

Diversification Opportunities for COSMO FIRST and City Union

0.55

Correlation Coefficient

COSMO FIRST  City Union

Very weak diversification

The 3 months correlation between COSMO and City is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding COSMO FIRST LIMITED and City Union Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on City Union Bank 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 City Union. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of City Union Bank has no effect on the direction of COSMO FIRST i.e., COSMO FIRST and City Union go up and down completely randomly.

Pair Corralation between COSMO FIRST and City Union

Assuming the 90 days trading horizon COSMO FIRST LIMITED is expected to generate 1.4 times more return on investment than City Union. However, COSMO FIRST is 1.4 times more volatile than City Union Bank. It trades about 0.05 of its potential returns per unit of risk. City Union Bank is currently generating about 0.06 per unit of risk. If you would invest  66,908  in COSMO FIRST LIMITED on September 26, 2024 and sell it today you would earn a total of  25,417  from holding COSMO FIRST LIMITED or generate 37.99% return on investment over 90 days.

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

COSMO FIRST LIMITED  vs.  City Union Bank

COSMO FIRST LIMITED

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in COSMO FIRST LIMITED are ranked lower than 8 (%) 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.

City Union Bank

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in City Union Bank are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, City Union may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with COSMO FIRST and City Union

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

The idea behind COSMO FIRST LIMITED and City Union Bank 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.