Correlation Between Cosmos and Near
Can any of the company-specific risk be diversified away by investing in both Cosmos and Near 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 Near into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cosmos and Near, you can compare the effects of market volatilities on Cosmos and Near 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 Near. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cosmos and Near.
Diversification Opportunities for Cosmos and Near
Very poor diversification
The 3 months correlation between Cosmos and Near is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Cosmos and Near in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Near 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 Near. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Near has no effect on the direction of Cosmos i.e., Cosmos and Near go up and down completely randomly.
Pair Corralation between Cosmos and Near
Assuming the 90 days trading horizon Cosmos is expected to generate 0.98 times more return on investment than Near. However, Cosmos is 1.02 times less risky than Near. It trades about 0.2 of its potential returns per unit of risk. Near is currently generating about 0.11 per unit of risk. If you would invest 460.00 in Cosmos on August 26, 2024 and sell it today you would earn a total of 363.00 from holding Cosmos or generate 78.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cosmos vs. Near
Performance |
| Timeline |
| Cosmos |
| Near |
Cosmos and Near Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cosmos and Near
The main advantage of trading using opposite Cosmos and Near positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cosmos position performs unexpectedly, Near 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 Near will offset losses from the drop in Near's long position.The idea behind Cosmos and Near 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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