Correlation Between Magic Empire and Cosmos Health

Can any of the company-specific risk be diversified away by investing in both Magic Empire and Cosmos Health 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 Magic Empire and Cosmos Health into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Magic Empire Global and Cosmos Health, you can compare the effects of market volatilities on Magic Empire and Cosmos Health 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 Magic Empire with a short position of Cosmos Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magic Empire and Cosmos Health.

Diversification Opportunities for Magic Empire and Cosmos Health

-0.53

Correlation Coefficient

Magic Empire  Cosmos Health

Excellent diversification

The 3 months correlation between Magic and Cosmos is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Magic Empire Global and Cosmos Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cosmos Health and Magic Empire 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 Magic Empire Global are associated (or correlated) with Cosmos Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cosmos Health has no effect on the direction of Magic Empire i.e., Magic Empire and Cosmos Health go up and down completely randomly.

Pair Corralation between Magic Empire and Cosmos Health

Given the investment horizon of 90 days Magic Empire Global is expected to generate 1.25 times more return on investment than Cosmos Health. However, Magic Empire is 1.25 times more volatile than Cosmos Health. It trades about 0.08 of its potential returns per unit of risk. Cosmos Health is currently generating about -0.09 per unit of risk. If you would invest  44.00  in Magic Empire Global on September 3, 2024 and sell it today you would earn a total of  9.00  from holding Magic Empire Global or generate 20.45% return on investment over 90 days.

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

Magic Empire Global  vs.  Cosmos Health

Magic Empire Global

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Magic Empire Global are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite weak technical and fundamental indicators, Magic Empire disclosed solid returns over the last few months and may actually be approaching a breakup point.

Cosmos Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cosmos Health 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 very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Magic Empire and Cosmos Health

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

The idea behind Magic Empire Global and Cosmos Health 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.