Correlation Between COSMO FIRST and Delta Manufacturing

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

Diversification Opportunities for COSMO FIRST and Delta Manufacturing

0.77

Correlation Coefficient

COSMO FIRST  Delta Manufacturing

Poor diversification

The 3 months correlation between COSMO and Delta is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding COSMO FIRST LIMITED and Delta Manufacturing Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Delta Manufacturing 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 Delta Manufacturing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Delta Manufacturing has no effect on the direction of COSMO FIRST i.e., COSMO FIRST and Delta Manufacturing go up and down completely randomly.

Pair Corralation between COSMO FIRST and Delta Manufacturing

Assuming the 90 days trading horizon COSMO FIRST LIMITED is expected to generate 0.95 times more return on investment than Delta Manufacturing. However, COSMO FIRST LIMITED is 1.05 times less risky than Delta Manufacturing. It trades about -0.05 of its potential returns per unit of risk. Delta Manufacturing Limited is currently generating about -0.18 per unit of risk. If you would invest  77,625  in COSMO FIRST LIMITED on November 27, 2024 and sell it today you would lose (10,930) from holding COSMO FIRST LIMITED or give up 14.08% of portfolio value over 90 days.

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

COSMO FIRST LIMITED  vs.  Delta Manufacturing Limited

COSMO FIRST LIMITED

Risk-Adjusted Performance

Very Weak

Over the last 90 days COSMO FIRST LIMITED has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest abnormal performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Delta Manufacturing

Risk-Adjusted Performance

Very Weak

Over the last 90 days Delta Manufacturing Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with COSMO FIRST and Delta Manufacturing

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

The idea behind COSMO FIRST LIMITED and Delta Manufacturing 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.