Correlation Between COSMO FIRST and NRB Industrial

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

Diversification Opportunities for COSMO FIRST and NRB Industrial

-0.36

Correlation Coefficient

COSMO FIRST  NRB Industrial

Very good diversification

The 3 months correlation between COSMO and NRB is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding COSMO FIRST LIMITED and NRB Industrial Bearings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NRB Industrial Bearings 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 NRB Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NRB Industrial Bearings has no effect on the direction of COSMO FIRST i.e., COSMO FIRST and NRB Industrial go up and down completely randomly.

Pair Corralation between COSMO FIRST and NRB Industrial

Assuming the 90 days trading horizon COSMO FIRST LIMITED is expected to generate 2.16 times more return on investment than NRB Industrial. However, COSMO FIRST is 2.16 times more volatile than NRB Industrial Bearings. It trades about 0.38 of its potential returns per unit of risk. NRB Industrial Bearings is currently generating about -0.02 per unit of risk. If you would invest  74,165  in COSMO FIRST LIMITED on September 20, 2024 and sell it today you would earn a total of  26,695  from holding COSMO FIRST LIMITED or generate 35.99% return on investment over 90 days.

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

COSMO FIRST LIMITED  vs.  NRB Industrial Bearings

COSMO FIRST LIMITED

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in COSMO FIRST LIMITED are ranked lower than 13 (%) 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.

NRB Industrial Bearings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NRB Industrial Bearings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 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 NRB Industrial

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

The idea behind COSMO FIRST LIMITED and NRB Industrial Bearings 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.