Correlation Between COSMO FIRST and DCB Bank

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

Diversification Opportunities for COSMO FIRST and DCB Bank

0.67

Correlation Coefficient

COSMO FIRST  DCB Bank

Poor diversification

The 3 months correlation between COSMO and DCB is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding COSMO FIRST LIMITED and DCB Bank Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DCB Bank Limited 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 DCB Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DCB Bank Limited has no effect on the direction of COSMO FIRST i.e., COSMO FIRST and DCB Bank go up and down completely randomly.

Pair Corralation between COSMO FIRST and DCB Bank

Assuming the 90 days trading horizon COSMO FIRST LIMITED is expected to generate 2.39 times more return on investment than DCB Bank. However, COSMO FIRST is 2.39 times more volatile than DCB Bank Limited. It trades about 0.3 of its potential returns per unit of risk. DCB Bank Limited is currently generating about 0.13 per unit of risk. If you would invest  74,375  in COSMO FIRST LIMITED on September 23, 2024 and sell it today you would earn a total of  21,030  from holding COSMO FIRST LIMITED or generate 28.28% return on investment over 90 days.

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

COSMO FIRST LIMITED  vs.  DCB Bank Limited

COSMO FIRST LIMITED

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in COSMO FIRST LIMITED are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, COSMO FIRST demonstrated solid returns over the last few months and may actually be approaching a breakup point.

DCB Bank Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DCB Bank Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, DCB Bank is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with COSMO FIRST and DCB Bank

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

The idea behind COSMO FIRST LIMITED and DCB Bank Limited 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.