Correlation Between Prime Financial and COG Financial

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

By analyzing existing cross correlation between Prime Financial Group and COG Financial Services, you can compare the effects of market volatilities on Prime Financial and COG Financial 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 Prime Financial with a short position of COG Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prime Financial and COG Financial.

Diversification Opportunities for Prime Financial and COG Financial

-0.34

Correlation Coefficient

Prime Financial  COG Financial

Very good diversification

The 3 months correlation between Prime and COG is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Prime Financial Group and COG Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COG Financial Services and Prime Financial 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 Prime Financial Group are associated (or correlated) with COG Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COG Financial Services has no effect on the direction of Prime Financial i.e., Prime Financial and COG Financial go up and down completely randomly.

Pair Corralation between Prime Financial and COG Financial

Assuming the 90 days trading horizon Prime Financial Group is expected to under-perform the COG Financial. In addition to that, Prime Financial is 1.22 times more volatile than COG Financial Services. It trades about -0.01 of its total potential returns per unit of risk. COG Financial Services is currently generating about 0.05 per unit of volatility. If you would invest  96.00  in COG Financial Services on October 6, 2024 and sell it today you would earn a total of  5.00  from holding COG Financial Services or generate 5.21% return on investment over 90 days.

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

Prime Financial Group  vs.  COG Financial Services

Prime Financial Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prime Financial Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Prime Financial is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

COG Financial Services

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in COG Financial Services are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, COG Financial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Prime Financial and COG Financial

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

The idea behind Prime Financial Group and COG Financial Services 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.