Correlation Between Cosmos and SOLVE
Can any of the company-specific risk be diversified away by investing in both Cosmos and SOLVE 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 SOLVE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cosmos and SOLVE, you can compare the effects of market volatilities on Cosmos and SOLVE 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 SOLVE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cosmos and SOLVE.
Diversification Opportunities for Cosmos and SOLVE
Poor diversification
The 3 months correlation between Cosmos and SOLVE is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Cosmos and SOLVE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SOLVE 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 SOLVE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SOLVE has no effect on the direction of Cosmos i.e., Cosmos and SOLVE go up and down completely randomly.
Pair Corralation between Cosmos and SOLVE
Assuming the 90 days trading horizon Cosmos is expected to generate 1.82 times less return on investment than SOLVE. But when comparing it to its historical volatility, Cosmos is 1.63 times less risky than SOLVE. It trades about 0.02 of its potential returns per unit of risk. SOLVE is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 3.74 in SOLVE on February 6, 2024 and sell it today you would lose (1.82) from holding SOLVE or give up 48.66% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cosmos vs. SOLVE
Performance |
| Timeline |
| Cosmos |
| SOLVE |
Cosmos and SOLVE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cosmos and SOLVE
The main advantage of trading using opposite Cosmos and SOLVE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cosmos position performs unexpectedly, SOLVE 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 SOLVE will offset losses from the drop in SOLVE's long position.The idea behind Cosmos and SOLVE 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
Other Complementary Tools
| Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| Sectors List of equity sectors categorizing publicly traded companies based on their primary business activities | |
| Global Markets Map Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes | |
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. | |
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum |