Correlation Between WATSCO INC and CosmoSteel Holdings
Can any of the company-specific risk be diversified away by investing in both WATSCO INC and CosmoSteel Holdings 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 WATSCO INC and CosmoSteel Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WATSCO INC B and CosmoSteel Holdings Limited, you can compare the effects of market volatilities on WATSCO INC and CosmoSteel Holdings 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 WATSCO INC with a short position of CosmoSteel Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of WATSCO INC and CosmoSteel Holdings.
Diversification Opportunities for WATSCO INC and CosmoSteel Holdings
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between WATSCO and CosmoSteel is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding WATSCO INC B and CosmoSteel Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CosmoSteel Holdings and WATSCO INC 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 WATSCO INC B are associated (or correlated) with CosmoSteel Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CosmoSteel Holdings has no effect on the direction of WATSCO INC i.e., WATSCO INC and CosmoSteel Holdings go up and down completely randomly.
Pair Corralation between WATSCO INC and CosmoSteel Holdings
Assuming the 90 days trading horizon WATSCO INC is expected to generate 1.38 times less return on investment than CosmoSteel Holdings. But when comparing it to its historical volatility, WATSCO INC B is 1.26 times less risky than CosmoSteel Holdings. It trades about 0.01 of its potential returns per unit of risk. CosmoSteel Holdings Limited is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 6.25 in CosmoSteel Holdings Limited on September 2, 2024 and sell it today you would earn a total of 0.00 from holding CosmoSteel Holdings Limited or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 98.48% |
| Values | Daily Returns |
WATSCO INC B vs. CosmoSteel Holdings Limited
Performance |
| Timeline |
| WATSCO INC B |
| CosmoSteel Holdings |
WATSCO INC and CosmoSteel Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WATSCO INC and CosmoSteel Holdings
The main advantage of trading using opposite WATSCO INC and CosmoSteel Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WATSCO INC position performs unexpectedly, CosmoSteel Holdings 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 CosmoSteel Holdings will offset losses from the drop in CosmoSteel Holdings' long position.| WATSCO INC vs. SCIENCE IN SPORT | WATSCO INC vs. Hyrican Informationssysteme Aktiengesellschaft | WATSCO INC vs. MICRONIC MYDATA | WATSCO INC vs. Sporttotal AG |
| CosmoSteel Holdings vs. WATSCO INC B | CosmoSteel Holdings vs. Superior Plus Corp | CosmoSteel Holdings vs. NMI Holdings | CosmoSteel Holdings vs. Origin Agritech |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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