Correlation Between Cosmos and REP

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

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

Diversification Opportunities for Cosmos and REP

0.86

Correlation Coefficient

Cosmos  REP

Very poor diversification

The 3 months correlation between Cosmos and REP is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Cosmos and REP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on REP 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 REP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of REP has no effect on the direction of Cosmos i.e., Cosmos and REP go up and down completely randomly.

Pair Corralation between Cosmos and REP

Assuming the 90 days trading horizon Cosmos is expected to under-perform the REP. But the crypto coin apears to be less risky and, when comparing its historical volatility, Cosmos is 1.4 times less risky than REP. The crypto coin trades about -0.35 of its potential returns per unit of risk. The REP is currently generating about -0.17 of returns per unit of risk over similar time horizon. If you would invest  132.00  in REP on January 26, 2024 and sell it today you would lose (36.00) from holding REP or give up 27.27% of portfolio value over 90 days.

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

Cosmos  vs.  REP

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 latest unsteady performance, the Crypto's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for Cosmos shareholders.

REP

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in REP are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, REP exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cosmos and REP

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

The idea behind Cosmos and REP 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.