Correlation Between Cosmos and Cronos

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

By analyzing existing cross correlation between Cosmos and Cronos, you can compare the effects of market volatilities on Cosmos and Cronos 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 Cronos. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cosmos and Cronos.

Diversification Opportunities for Cosmos and Cronos

0.7

Correlation Coefficient

Cosmos  Cronos

Poor diversification

The 3 months correlation between Cosmos and Cronos is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Cosmos and Cronos in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cronos 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 Cronos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cronos has no effect on the direction of Cosmos i.e., Cosmos and Cronos go up and down completely randomly.

Pair Corralation between Cosmos and Cronos

Assuming the 90 days trading horizon Cosmos is expected to under-perform the Cronos. In addition to that, Cosmos is 1.14 times more volatile than Cronos. It trades about -0.29 of its total potential returns per unit of risk. Cronos is currently generating about -0.13 per unit of volatility. If you would invest  15.00  in Cronos on January 24, 2024 and sell it today you would lose (2.00) from holding Cronos or give up 13.33% of portfolio value over 90 days.

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

Cosmos  vs.  Cronos

Cosmos

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cosmos has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Cosmos is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Cronos

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cronos are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Cronos exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cosmos and Cronos

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

The idea behind Cosmos and Cronos 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.