Correlation Between COSMO FIRST and Reliance Industrial

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

Diversification Opportunities for COSMO FIRST and Reliance Industrial

0.06

Correlation Coefficient

COSMO FIRST  Reliance Industrial

Significant diversification

The 3 months correlation between COSMO and Reliance is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding COSMO FIRST LIMITED and Reliance Industrial Infrastruc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reliance Industrial 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 Reliance Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reliance Industrial has no effect on the direction of COSMO FIRST i.e., COSMO FIRST and Reliance Industrial go up and down completely randomly.

Pair Corralation between COSMO FIRST and Reliance Industrial

Assuming the 90 days trading horizon COSMO FIRST LIMITED is expected to generate 1.1 times more return on investment than Reliance Industrial. However, COSMO FIRST is 1.1 times more volatile than Reliance Industrial Infrastructure. It trades about 0.15 of its potential returns per unit of risk. Reliance Industrial Infrastructure is currently generating about -0.02 per unit of risk. If you would invest  74,450  in COSMO FIRST LIMITED on October 9, 2024 and sell it today you would earn a total of  25,365  from holding COSMO FIRST LIMITED or generate 34.07% return on investment over 90 days.

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

COSMO FIRST LIMITED  vs.  Reliance Industrial Infrastruc

COSMO FIRST LIMITED

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in COSMO FIRST LIMITED are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, COSMO FIRST demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Reliance Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Reliance Industrial Infrastructure has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Reliance Industrial 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 Reliance Industrial

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

The idea behind COSMO FIRST LIMITED and Reliance Industrial Infrastructure 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.