Correlation Between Cosmos and Quant
Can any of the company-specific risk be diversified away by investing in both Cosmos and Quant 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 Cosmos and Quant into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cosmos and Quant, you can compare the effects of market volatilities on Cosmos and Quant 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 Cosmos with a short position of Quant. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cosmos and Quant.
Diversification Opportunities for Cosmos and Quant
Poor diversification
The 3 months correlation between Cosmos and Quant is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Cosmos and Quant in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quant and Cosmos 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 Cosmos are associated (or correlated) with Quant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quant has no effect on the direction of Cosmos i.e., Cosmos and Quant go up and down completely randomly.
Pair Corralation between Cosmos and Quant
Assuming the 90 days trading horizon Cosmos is expected to generate 2.1 times less return on investment than Quant. But when comparing it to its historical volatility, Cosmos is 1.05 times less risky than Quant. It trades about 0.09 of its potential returns per unit of risk. Quant is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 11,040 in Quant on December 29, 2023 and sell it today you would earn a total of 2,532 from holding Quant or generate 22.93% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Cosmos vs. Quant
Performance |
Timeline |
Cosmos |
Quant |
Cosmos and Quant Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Cosmos and Quant
The main advantage of trading using opposite Cosmos and Quant positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cosmos position performs unexpectedly, Quant 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 Quant will offset losses from the drop in Quant's long position.The idea behind Cosmos and Quant 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.Check out your portfolio center.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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
Other Complementary Tools
Fundamental Analysis View fundamental data based on most recent published financial statements | |
AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges | |
Share Portfolio Track or share privately all of your investments from the convenience of any device | |
Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios | |
Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets |