Correlation Between Innova Captab and COSMO FIRST

Can any of the company-specific risk be diversified away by investing in both Innova Captab and COSMO FIRST 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 Innova Captab and COSMO FIRST into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Innova Captab Limited and COSMO FIRST LIMITED, you can compare the effects of market volatilities on Innova Captab and COSMO FIRST 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 Innova Captab with a short position of COSMO FIRST. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innova Captab and COSMO FIRST.

Diversification Opportunities for Innova Captab and COSMO FIRST

0.61

Correlation Coefficient

Innova Captab  COSMO FIRST

Poor diversification

The 3 months correlation between Innova and COSMO is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Innova Captab Limited and COSMO FIRST LIMITED in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COSMO FIRST LIMITED and Innova Captab 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 Innova Captab Limited are associated (or correlated) with COSMO FIRST. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COSMO FIRST LIMITED has no effect on the direction of Innova Captab i.e., Innova Captab and COSMO FIRST go up and down completely randomly.

Pair Corralation between Innova Captab and COSMO FIRST

Assuming the 90 days trading horizon Innova Captab Limited is expected to under-perform the COSMO FIRST. But the stock apears to be less risky and, when comparing its historical volatility, Innova Captab Limited is 1.17 times less risky than COSMO FIRST. The stock trades about -0.06 of its potential returns per unit of risk. The COSMO FIRST LIMITED is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  76,975  in COSMO FIRST LIMITED on September 27, 2024 and sell it today you would earn a total of  15,350  from holding COSMO FIRST LIMITED or generate 19.94% return on investment over 90 days.

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

Innova Captab Limited  vs.  COSMO FIRST LIMITED

Innova Captab Limited

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Innova Captab Limited are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Innova Captab exhibited solid returns over the last few months and may actually be approaching a breakup point.

COSMO FIRST LIMITED

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in COSMO FIRST LIMITED are ranked lower than 8 (%) 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.

Pair Trading with Innova Captab and COSMO FIRST

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

The idea behind Innova Captab Limited and COSMO FIRST 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.