Correlation Between COSMO FIRST and Rico Auto

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

By analyzing existing cross correlation between COSMO FIRST LIMITED and Rico Auto Industries, you can compare the effects of market volatilities on COSMO FIRST and Rico Auto 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 COSMO FIRST with a short position of Rico Auto. Check out your portfolio center. Please also check ongoing floating volatility patterns of COSMO FIRST and Rico Auto.

Diversification Opportunities for COSMO FIRST and Rico Auto

0.87

Correlation Coefficient

COSMO FIRST  Rico Auto

Very poor diversification

The 3 months correlation between COSMO and Rico is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding COSMO FIRST LIMITED and Rico Auto Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rico Auto Industries and COSMO FIRST 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 COSMO FIRST LIMITED are associated (or correlated) with Rico Auto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rico Auto Industries has no effect on the direction of COSMO FIRST i.e., COSMO FIRST and Rico Auto go up and down completely randomly.

Pair Corralation between COSMO FIRST and Rico Auto

Assuming the 90 days trading horizon COSMO FIRST LIMITED is expected to generate 1.69 times more return on investment than Rico Auto. However, COSMO FIRST is 1.69 times more volatile than Rico Auto Industries. It trades about 0.22 of its potential returns per unit of risk. Rico Auto Industries is currently generating about 0.08 per unit of risk. If you would invest  62,575  in COSMO FIRST LIMITED on April 24, 2025 and sell it today you would earn a total of  48,895  from holding COSMO FIRST LIMITED or generate 78.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

COSMO FIRST LIMITED  vs.  Rico Auto Industries

COSMO FIRST LIMITED

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in COSMO FIRST LIMITED are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, COSMO FIRST demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Rico Auto Industries

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Rico Auto Industries are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Rico Auto unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with COSMO FIRST and Rico Auto

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

The idea behind COSMO FIRST LIMITED and Rico Auto Industries 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.