Correlation Between Quant and Cosmos

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

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

Diversification Opportunities for Quant and Cosmos

0.86

Correlation Coefficient

Quant  Cosmos

Very poor diversification

The 3 months correlation between Quant and Cosmos is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Quant and Cosmos in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cosmos and Quant 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 Quant 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 Quant i.e., Quant and Cosmos go up and down completely randomly.

Pair Corralation between Quant and Cosmos

Assuming the 90 days trading horizon Quant is expected to generate 0.92 times more return on investment than Cosmos. However, Quant is 1.09 times less risky than Cosmos. It trades about -0.21 of its potential returns per unit of risk. Cosmos is currently generating about -0.35 per unit of risk. If you would invest  13,647  in Quant on January 26, 2024 and sell it today you would lose (2,862) from holding Quant or give up 20.97% of portfolio value over 90 days.

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

Quant  vs.  Cosmos

Quant

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Quant are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Quant is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

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.

Pair Trading with Quant and Cosmos

The main advantage of trading using opposite Quant and Cosmos positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Quant 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 Quant 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.