Correlation Between COSMO FIRST and MRF

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

Diversification Opportunities for COSMO FIRST and MRF

0.27
  Correlation Coefficient
 MRF

Modest diversification

The 3 months correlation between COSMO and MRF is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding COSMO FIRST LIMITED and MRF Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MRF Limited and COSMO FIRST 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 FIRST LIMITED are associated (or correlated) with MRF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MRF Limited has no effect on the direction of COSMO FIRST i.e., COSMO FIRST and MRF go up and down completely randomly.

Pair Corralation between COSMO FIRST and MRF

Assuming the 90 days trading horizon COSMO FIRST LIMITED is expected to generate 4.65 times more return on investment than MRF. However, COSMO FIRST is 4.65 times more volatile than MRF Limited. It trades about 0.23 of its potential returns per unit of risk. MRF Limited is currently generating about 0.29 per unit of risk. If you would invest  77,715  in COSMO FIRST LIMITED on September 29, 2024 and sell it today you would earn a total of  17,275  from holding COSMO FIRST LIMITED or generate 22.23% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy95.45%
ValuesDaily Returns

COSMO FIRST LIMITED  vs.  MRF Limited

 Performance 
       Timeline  
COSMO FIRST LIMITED 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in COSMO FIRST LIMITED are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain basic indicators, COSMO FIRST demonstrated solid returns over the last few months and may actually be approaching a breakup point.
MRF Limited 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days MRF Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, MRF is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

COSMO FIRST and MRF Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with COSMO FIRST and MRF

The main advantage of trading using opposite COSMO FIRST and MRF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if COSMO FIRST position performs unexpectedly, MRF 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 MRF will offset losses from the drop in MRF's long position.
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The idea behind COSMO FIRST LIMITED and MRF Limited 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.

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