Correlation Between COSMO FIRST and Mcnally Bharat

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

Diversification Opportunities for COSMO FIRST and Mcnally Bharat

-0.25

Correlation Coefficient

COSMO FIRST  Mcnally Bharat

Very good diversification

The 3 months correlation between COSMO and Mcnally is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding COSMO FIRST LIMITED and Mcnally Bharat Engineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mcnally Bharat Engin 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 Mcnally Bharat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mcnally Bharat Engin has no effect on the direction of COSMO FIRST i.e., COSMO FIRST and Mcnally Bharat go up and down completely randomly.

Pair Corralation between COSMO FIRST and Mcnally Bharat

Assuming the 90 days trading horizon COSMO FIRST is expected to generate 141.84 times less return on investment than Mcnally Bharat. But when comparing it to its historical volatility, COSMO FIRST LIMITED is 45.81 times less risky than Mcnally Bharat. It trades about 0.03 of its potential returns per unit of risk. Mcnally Bharat Engineering is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  140,000  in Mcnally Bharat Engineering on October 11, 2024 and sell it today you would lose (139,554) from holding Mcnally Bharat Engineering or give up 99.68% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	72.93%
Values	Daily Returns

COSMO FIRST LIMITED  vs.  Mcnally Bharat Engineering

COSMO FIRST LIMITED

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in COSMO FIRST LIMITED are ranked lower than 10 (%) 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.

Mcnally Bharat Engin

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mcnally Bharat Engineering are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical and fundamental indicators, Mcnally Bharat displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with COSMO FIRST and Mcnally Bharat

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

The idea behind COSMO FIRST LIMITED and Mcnally Bharat Engineering 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.