Correlation Between COSMO FIRST and Modi Rubber

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

Diversification Opportunities for COSMO FIRST and Modi Rubber

0.8

Correlation Coefficient

COSMO FIRST  Modi Rubber

Very poor diversification

The 3 months correlation between COSMO and Modi is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding COSMO FIRST LIMITED and Modi Rubber Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Modi Rubber 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 Modi Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Modi Rubber Limited has no effect on the direction of COSMO FIRST i.e., COSMO FIRST and Modi Rubber go up and down completely randomly.

Pair Corralation between COSMO FIRST and Modi Rubber

Assuming the 90 days trading horizon COSMO FIRST LIMITED is expected to under-perform the Modi Rubber. In addition to that, COSMO FIRST is 1.34 times more volatile than Modi Rubber Limited. It trades about -0.13 of its total potential returns per unit of risk. Modi Rubber Limited is currently generating about -0.15 per unit of volatility. If you would invest  12,990  in Modi Rubber Limited on December 1, 2024 and sell it today you would lose (3,173) from holding Modi Rubber Limited or give up 24.43% of portfolio value over 90 days.

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

COSMO FIRST LIMITED  vs.  Modi Rubber 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 uncertain 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.

Modi Rubber Limited

Risk-Adjusted Performance

Very Weak

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

Pair Trading with COSMO FIRST and Modi Rubber

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

The idea behind COSMO FIRST LIMITED and Modi Rubber 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.