Correlation Between Alpha Finance and Cosmos

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Can any of the company-specific risk be diversified away by investing in both Alpha Finance 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 Alpha Finance and Cosmos into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alpha Finance Lab and Cosmos, you can compare the effects of market volatilities on Alpha Finance 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 Alpha Finance with a short position of Cosmos. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alpha Finance and Cosmos.

Diversification Opportunities for Alpha Finance and Cosmos

0.93
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Alpha and Cosmos is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Alpha Finance Lab and Cosmos in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cosmos and Alpha Finance 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 Alpha Finance Lab 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 Alpha Finance i.e., Alpha Finance and Cosmos go up and down completely randomly.

Pair Corralation between Alpha Finance and Cosmos

Assuming the 90 days trading horizon Alpha Finance Lab is expected to generate 1.35 times more return on investment than Cosmos. However, Alpha Finance is 1.35 times more volatile than Cosmos. It trades about 0.07 of its potential returns per unit of risk. Cosmos is currently generating about 0.09 per unit of risk. If you would invest  15.00  in Alpha Finance Lab on December 29, 2023 and sell it today you would earn a total of  1.00  from holding Alpha Finance Lab or generate 6.67% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Alpha Finance Lab  vs.  Cosmos

 Performance 
       Timeline  
Alpha Finance Lab 

Risk-Adjusted Performance

6 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Alpha Finance Lab are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Alpha Finance exhibited solid returns over the last few months and may actually be approaching a breakup point.
Cosmos 

Risk-Adjusted Performance

5 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Cosmos are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Cosmos exhibited solid returns over the last few months and may actually be approaching a breakup point.

Alpha Finance and Cosmos Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Alpha Finance and Cosmos

The main advantage of trading using opposite Alpha Finance and Cosmos positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alpha Finance 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 Alpha Finance Lab 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.
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.

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