Correlation Between Cosmos and Orbs

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Can any of the company-specific risk be diversified away by investing in both Cosmos and Orbs 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 Orbs into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cosmos and Orbs, you can compare the effects of market volatilities on Cosmos and Orbs 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 Orbs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cosmos and Orbs.

Diversification Opportunities for Cosmos and Orbs

0.94
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Cosmos and Orbs is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Cosmos and Orbs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orbs 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 Orbs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orbs has no effect on the direction of Cosmos i.e., Cosmos and Orbs go up and down completely randomly.

Pair Corralation between Cosmos and Orbs

Assuming the 90 days trading horizon Cosmos is expected to generate 1.35 times less return on investment than Orbs. But when comparing it to its historical volatility, Cosmos is 1.27 times less risky than Orbs. It trades about 0.1 of its potential returns per unit of risk. Orbs is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  4.20  in Orbs on December 30, 2023 and sell it today you would earn a total of  0.49  from holding Orbs or generate 11.67% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Cosmos  vs.  Orbs

 Performance 
       Timeline  
Cosmos 

Risk-Adjusted Performance

7 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Cosmos are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Cosmos exhibited solid returns over the last few months and may actually be approaching a breakup point.
Orbs 

Risk-Adjusted Performance

7 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Orbs are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Orbs exhibited solid returns over the last few months and may actually be approaching a breakup point.

Cosmos and Orbs Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Cosmos and Orbs

The main advantage of trading using opposite Cosmos and Orbs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cosmos position performs unexpectedly, Orbs 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 Orbs will offset losses from the drop in Orbs' long position.
The idea behind Cosmos and Orbs 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.

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