Correlation Between Mosaic and Polaris

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

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

Diversification Opportunities for Mosaic and Polaris

0.55

Correlation Coefficient

Mosaic  Polaris

Very weak diversification

The 3 months correlation between Mosaic and Polaris is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding The Mosaic and Polaris in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polaris and Mosaic 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 The Mosaic are associated (or correlated) with Polaris. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Polaris has no effect on the direction of Mosaic i.e., Mosaic and Polaris go up and down completely randomly.

Pair Corralation between Mosaic and Polaris

Assuming the 90 days trading horizon The Mosaic is expected to generate 7.08 times more return on investment than Polaris. However, Mosaic is 7.08 times more volatile than Polaris. It trades about 0.24 of its potential returns per unit of risk. Polaris is currently generating about 0.13 per unit of risk. If you would invest  53,650  in The Mosaic on April 23, 2025 and sell it today you would earn a total of  15,022  from holding The Mosaic or generate 28.0% return on investment over 90 days.

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

The Mosaic  vs.  Polaris

Mosaic

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in The Mosaic are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Mosaic showed solid returns over the last few months and may actually be approaching a breakup point.

Polaris

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Polaris are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong forward indicators, Polaris is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Mosaic and Polaris

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

The idea behind The Mosaic and Polaris 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.