Correlation Between COSMO FIRST and LT Foods

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

Diversification Opportunities for COSMO FIRST and LT Foods

0.35

Correlation Coefficient

COSMO FIRST  LT Foods

Weak diversification

The 3 months correlation between COSMO and LTFOODS is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding COSMO FIRST LIMITED and LT Foods Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LT Foods 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 LT Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LT Foods Limited has no effect on the direction of COSMO FIRST i.e., COSMO FIRST and LT Foods go up and down completely randomly.

Pair Corralation between COSMO FIRST and LT Foods

Assuming the 90 days trading horizon COSMO FIRST LIMITED is expected to generate 0.74 times more return on investment than LT Foods. However, COSMO FIRST LIMITED is 1.36 times less risky than LT Foods. It trades about 0.07 of its potential returns per unit of risk. LT Foods Limited is currently generating about 0.01 per unit of risk. If you would invest  77,440  in COSMO FIRST LIMITED on September 3, 2024 and sell it today you would earn a total of  6,855  from holding COSMO FIRST LIMITED or generate 8.85% return on investment over 90 days.

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

COSMO FIRST LIMITED  vs.  LT Foods Limited

COSMO FIRST LIMITED

Risk-Adjusted Performance

5 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in COSMO FIRST LIMITED are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, COSMO FIRST may actually be approaching a critical reversion point that can send shares even higher in January 2025.

LT Foods Limited

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in LT Foods Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, LT Foods 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 LT Foods

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

The idea behind COSMO FIRST LIMITED and LT Foods 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.