Correlation Between Cosmos and AERGO

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

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

Diversification Opportunities for Cosmos and AERGO

0.7

Correlation Coefficient

Cosmos  AERGO

Poor diversification

The 3 months correlation between Cosmos and AERGO is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Cosmos and AERGO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AERGO 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 AERGO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AERGO has no effect on the direction of Cosmos i.e., Cosmos and AERGO go up and down completely randomly.

Pair Corralation between Cosmos and AERGO

Assuming the 90 days trading horizon Cosmos is expected to under-perform the AERGO. But the crypto coin apears to be less risky and, when comparing its historical volatility, Cosmos is 1.97 times less risky than AERGO. The crypto coin trades about -0.28 of its potential returns per unit of risk. The AERGO is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  19.00  in AERGO on January 25, 2024 and sell it today you would lose (5.00) from holding AERGO or give up 26.32% of portfolio value over 90 days.

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

Cosmos  vs.  AERGO

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.

AERGO

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AERGO are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, AERGO exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cosmos and AERGO

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

The idea behind Cosmos and AERGO 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.