Correlation Between Fujian Longzhou and Cofoe Medical

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

By analyzing existing cross correlation between Fujian Longzhou Transportation and Cofoe Medical Technology, you can compare the effects of market volatilities on Fujian Longzhou and Cofoe 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 Fujian Longzhou with a short position of Cofoe Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fujian Longzhou and Cofoe Medical.

Diversification Opportunities for Fujian Longzhou and Cofoe Medical

0.56

Correlation Coefficient

Fujian Longzhou  Cofoe Medical

Very weak diversification

The 3 months correlation between Fujian and Cofoe is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Fujian Longzhou Transportation and Cofoe Medical Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cofoe Medical Technology and Fujian Longzhou 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 Fujian Longzhou Transportation are associated (or correlated) with Cofoe Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cofoe Medical Technology has no effect on the direction of Fujian Longzhou i.e., Fujian Longzhou and Cofoe Medical go up and down completely randomly.

Pair Corralation between Fujian Longzhou and Cofoe Medical

Assuming the 90 days trading horizon Fujian Longzhou Transportation is expected to generate 1.27 times more return on investment than Cofoe Medical. However, Fujian Longzhou is 1.27 times more volatile than Cofoe Medical Technology. It trades about 0.06 of its potential returns per unit of risk. Cofoe Medical Technology is currently generating about 0.04 per unit of risk. If you would invest  358.00  in Fujian Longzhou Transportation on September 27, 2024 and sell it today you would earn a total of  69.00  from holding Fujian Longzhou Transportation or generate 19.27% return on investment over 90 days.

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

Fujian Longzhou Transportation  vs.  Cofoe Medical Technology

Fujian Longzhou Tran

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fujian Longzhou Transportation are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Fujian Longzhou sustained solid returns over the last few months and may actually be approaching a breakup point.

Cofoe Medical Technology

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cofoe Medical Technology are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Cofoe Medical may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Fujian Longzhou and Cofoe Medical

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

The idea behind Fujian Longzhou Transportation and Cofoe Medical Technology 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.