Correlation Between Cosmos and LEND

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

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

Diversification Opportunities for Cosmos and LEND

-0.18

Correlation Coefficient

Cosmos  LEND

Good diversification

The 3 months correlation between Cosmos and LEND is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Cosmos and LEND in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LEND 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 LEND. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LEND has no effect on the direction of Cosmos i.e., Cosmos and LEND go up and down completely randomly.

Pair Corralation between Cosmos and LEND

Assuming the 90 days trading horizon Cosmos is expected to generate 46.41 times less return on investment than LEND. But when comparing it to its historical volatility, Cosmos is 8.46 times less risky than LEND. It trades about 0.01 of its potential returns per unit of risk. LEND is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  0.00  in LEND on January 27, 2024 and sell it today you would earn a total of  127.00  from holding LEND or generate 9.223372036854776E16% return on investment over 90 days.

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

Cosmos  vs.  LEND

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.

LEND

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in LEND are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, LEND exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cosmos and LEND

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

The idea behind Cosmos and LEND 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.