Correlation Between SISF BRIC and Cobas Global

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

By analyzing existing cross correlation between SISF BRIC AC and Cobas Global PP, you can compare the effects of market volatilities on SISF BRIC and Cobas Global 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 SISF BRIC with a short position of Cobas Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of SISF BRIC and Cobas Global.

Diversification Opportunities for SISF BRIC and Cobas Global

0.49

Correlation Coefficient

SISF BRIC  Cobas Global

Very weak diversification

The 3 months correlation between SISF and Cobas is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding SISF BRIC AC and Cobas Global PP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cobas Global PP and SISF BRIC 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 SISF BRIC AC are associated (or correlated) with Cobas Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cobas Global PP has no effect on the direction of SISF BRIC i.e., SISF BRIC and Cobas Global go up and down completely randomly.

Pair Corralation between SISF BRIC and Cobas Global

Assuming the 90 days trading horizon SISF BRIC AC is expected to under-perform the Cobas Global. In addition to that, SISF BRIC is 2.3 times more volatile than Cobas Global PP. It trades about -0.01 of its total potential returns per unit of risk. Cobas Global PP is currently generating about 0.07 per unit of volatility. If you would invest  12,072  in Cobas Global PP on September 25, 2024 and sell it today you would earn a total of  87.00  from holding Cobas Global PP or generate 0.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

SISF BRIC AC  vs.  Cobas Global PP

SISF BRIC AC

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SISF BRIC AC are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of rather sound technical and fundamental indicators, SISF BRIC is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Cobas Global PP

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cobas Global PP are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat strong basic indicators, Cobas Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with SISF BRIC and Cobas Global

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

The idea behind SISF BRIC AC and Cobas Global PP 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.