Correlation Between COSMO Pharmaceuticals and Idorsia
Can any of the company-specific risk be diversified away by investing in both COSMO Pharmaceuticals and Idorsia 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 COSMO Pharmaceuticals and Idorsia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between COSMO Pharmaceuticals SA and Idorsia, you can compare the effects of market volatilities on COSMO Pharmaceuticals and Idorsia 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 COSMO Pharmaceuticals with a short position of Idorsia. Check out your portfolio center. Please also check ongoing floating volatility patterns of COSMO Pharmaceuticals and Idorsia.
Diversification Opportunities for COSMO Pharmaceuticals and Idorsia
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between COSMO and Idorsia is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding COSMO Pharmaceuticals SA and Idorsia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Idorsia and COSMO Pharmaceuticals 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 COSMO Pharmaceuticals SA are associated (or correlated) with Idorsia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Idorsia has no effect on the direction of COSMO Pharmaceuticals i.e., COSMO Pharmaceuticals and Idorsia go up and down completely randomly.
Pair Corralation between COSMO Pharmaceuticals and Idorsia
Assuming the 90 days trading horizon COSMO Pharmaceuticals SA is expected to generate 0.19 times more return on investment than Idorsia. However, COSMO Pharmaceuticals SA is 5.15 times less risky than Idorsia. It trades about -0.39 of its potential returns per unit of risk. Idorsia is currently generating about -0.28 per unit of risk. If you would invest 6,980 in COSMO Pharmaceuticals SA on August 29, 2024 and sell it today you would lose (710.00) from holding COSMO Pharmaceuticals SA or give up 10.17% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
COSMO Pharmaceuticals SA vs. Idorsia
Performance |
| Timeline |
| COSMO Pharmaceuticals |
| Idorsia |
COSMO Pharmaceuticals and Idorsia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with COSMO Pharmaceuticals and Idorsia
The main advantage of trading using opposite COSMO Pharmaceuticals and Idorsia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if COSMO Pharmaceuticals position performs unexpectedly, Idorsia 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 Idorsia will offset losses from the drop in Idorsia's long position.The idea behind COSMO Pharmaceuticals SA and Idorsia 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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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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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