Correlation Between Cosmos and ARK

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

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

Diversification Opportunities for Cosmos and ARK

0.9

Correlation Coefficient

Cosmos  ARK

Almost no diversification

The 3 months correlation between Cosmos and ARK is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Cosmos and ARK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARK 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 ARK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARK has no effect on the direction of Cosmos i.e., Cosmos and ARK go up and down completely randomly.

Pair Corralation between Cosmos and ARK

Assuming the 90 days trading horizon Cosmos is expected to under-perform the ARK. But the crypto coin apears to be less risky and, when comparing its historical volatility, Cosmos is 1.15 times less risky than ARK. The crypto coin trades about -0.31 of its potential returns per unit of risk. The ARK is currently generating about -0.23 of returns per unit of risk over similar time horizon. If you would invest  113.00  in ARK on January 25, 2024 and sell it today you would lose (32.00) from holding ARK or give up 28.32% 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.  ARK

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.

ARK

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days ARK has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward-looking signals, ARK is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Cosmos and ARK

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

The idea behind Cosmos and ARK 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.