Correlation Between Cosmos and SXP
Can any of the company-specific risk be diversified away by investing in both Cosmos and SXP 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 SXP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cosmos and SXP, you can compare the effects of market volatilities on Cosmos and SXP 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 SXP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cosmos and SXP.
Diversification Opportunities for Cosmos and SXP
Almost no diversification
The 3 months correlation between Cosmos and SXP is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Cosmos and SXP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SXP 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 SXP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SXP has no effect on the direction of Cosmos i.e., Cosmos and SXP go up and down completely randomly.
Pair Corralation between Cosmos and SXP
Assuming the 90 days trading horizon Cosmos is expected to under-perform the SXP. But the crypto coin apears to be less risky and, when comparing its historical volatility, Cosmos is 1.52 times less risky than SXP. The crypto coin trades about -0.29 of its potential returns per unit of risk. The SXP is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest 42.00 in SXP on January 20, 2024 and sell it today you would lose (9.00) from holding SXP or give up 21.43% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cosmos vs. SXP
Performance |
| Timeline |
| Cosmos |
| SXP |
Cosmos and SXP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cosmos and SXP
The main advantage of trading using opposite Cosmos and SXP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cosmos position performs unexpectedly, SXP 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 SXP will offset losses from the drop in SXP's long position.The idea behind Cosmos and SXP 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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