Correlation Between Tembo Global and COSMO FIRST

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

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

Diversification Opportunities for Tembo Global and COSMO FIRST

0.76

Correlation Coefficient

Tembo Global  COSMO FIRST

Poor diversification

The 3 months correlation between Tembo and COSMO is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Tembo Global Industries 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 Tembo Global 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 Tembo Global Industries 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 Tembo Global i.e., Tembo Global and COSMO FIRST go up and down completely randomly.

Pair Corralation between Tembo Global and COSMO FIRST

Assuming the 90 days trading horizon Tembo Global Industries is expected to generate 0.98 times more return on investment than COSMO FIRST. However, Tembo Global Industries is 1.02 times less risky than COSMO FIRST. It trades about 0.21 of its potential returns per unit of risk. COSMO FIRST LIMITED is currently generating about 0.05 per unit of risk. If you would invest  48,000  in Tembo Global Industries on October 25, 2024 and sell it today you would earn a total of  24,590  from holding Tembo Global Industries or generate 51.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

Tembo Global Industries  vs.  COSMO FIRST LIMITED

Tembo Global Industries

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tembo Global Industries are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, Tembo Global displayed solid returns over the last few months and may actually be approaching a breakup point.

COSMO FIRST LIMITED

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in COSMO FIRST LIMITED are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, COSMO FIRST may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Tembo Global and COSMO FIRST

The main advantage of trading using opposite Tembo Global and COSMO FIRST positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tembo Global 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 Tembo Global Industries 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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.