Correlation Between Shenzhen Glory and Cowealth Medical

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

By analyzing existing cross correlation between Shenzhen Glory Medical and Cowealth Medical China, you can compare the effects of market volatilities on Shenzhen Glory and Cowealth Medical 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 Shenzhen Glory with a short position of Cowealth Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shenzhen Glory and Cowealth Medical.

Diversification Opportunities for Shenzhen Glory and Cowealth Medical

0.93

Correlation Coefficient

Shenzhen Glory  Cowealth Medical

Almost no diversification

The 3 months correlation between Shenzhen and Cowealth is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Glory Medical and Cowealth Medical China in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cowealth Medical China and Shenzhen Glory 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 Shenzhen Glory Medical are associated (or correlated) with Cowealth Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cowealth Medical China has no effect on the direction of Shenzhen Glory i.e., Shenzhen Glory and Cowealth Medical go up and down completely randomly.

Pair Corralation between Shenzhen Glory and Cowealth Medical

Assuming the 90 days trading horizon Shenzhen Glory Medical is expected to generate 0.92 times more return on investment than Cowealth Medical. However, Shenzhen Glory Medical is 1.09 times less risky than Cowealth Medical. It trades about 0.22 of its potential returns per unit of risk. Cowealth Medical China is currently generating about 0.18 per unit of risk. If you would invest  252.00  in Shenzhen Glory Medical on September 12, 2024 and sell it today you would earn a total of  123.00  from holding Shenzhen Glory Medical or generate 48.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Shenzhen Glory Medical  vs.  Cowealth Medical China

Shenzhen Glory Medical

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Glory Medical are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen Glory sustained solid returns over the last few months and may actually be approaching a breakup point.

Cowealth Medical China

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cowealth Medical China are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Cowealth Medical sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shenzhen Glory and Cowealth Medical

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

The idea behind Shenzhen Glory Medical and Cowealth Medical China 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.