Correlation Between COSMO FIRST and Linc

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

Diversification Opportunities for COSMO FIRST and Linc

0.66

Correlation Coefficient

COSMO FIRST  Linc

Poor diversification

The 3 months correlation between COSMO and Linc is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding COSMO FIRST LIMITED and Linc Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Linc 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 Linc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Linc Limited has no effect on the direction of COSMO FIRST i.e., COSMO FIRST and Linc go up and down completely randomly.

Pair Corralation between COSMO FIRST and Linc

Assuming the 90 days trading horizon COSMO FIRST LIMITED is expected to generate 1.06 times more return on investment than Linc. However, COSMO FIRST is 1.06 times more volatile than Linc Limited. It trades about -0.16 of its potential returns per unit of risk. Linc Limited is currently generating about -0.19 per unit of risk. If you would invest  89,635  in COSMO FIRST LIMITED on December 29, 2024 and sell it today you would lose (28,095) from holding COSMO FIRST LIMITED or give up 31.34% of portfolio value over 90 days.

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

COSMO FIRST LIMITED  vs.  Linc 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 weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Linc Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Linc Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with COSMO FIRST and Linc

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

The idea behind COSMO FIRST LIMITED and Linc 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.