Correlation Between DigiByte and Cosmos

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

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

Diversification Opportunities for DigiByte and Cosmos

0.63

Correlation Coefficient

DigiByte  Cosmos

Poor diversification

The 3 months correlation between DigiByte and Cosmos is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding DigiByte and Cosmos in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cosmos and DigiByte 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 DigiByte are associated (or correlated) with Cosmos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cosmos has no effect on the direction of DigiByte i.e., DigiByte and Cosmos go up and down completely randomly.

Pair Corralation between DigiByte and Cosmos

Assuming the 90 days trading horizon DigiByte is expected to generate 0.97 times more return on investment than Cosmos. However, DigiByte is 1.03 times less risky than Cosmos. It trades about 0.01 of its potential returns per unit of risk. Cosmos is currently generating about 0.0 per unit of risk. If you would invest  1.86  in DigiByte on January 24, 2024 and sell it today you would lose (0.53) from holding DigiByte or give up 28.49% of portfolio value over 90 days.

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

DigiByte  vs.  Cosmos

DigiByte

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DigiByte are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental drivers, DigiByte exhibited solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with DigiByte and Cosmos

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

The idea behind DigiByte and Cosmos 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.