Correlation Between Beijing HuaYuanYiTong and Cofoe Medical

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

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

Diversification Opportunities for Beijing HuaYuanYiTong and Cofoe Medical

0.81

Correlation Coefficient

Beijing HuaYuanYiTong  Cofoe Medical

Very poor diversification

The 3 months correlation between Beijing and Cofoe is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Beijing HuaYuanYiTong Thermal 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 Beijing HuaYuanYiTong 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 Beijing HuaYuanYiTong Thermal 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 Beijing HuaYuanYiTong i.e., Beijing HuaYuanYiTong and Cofoe Medical go up and down completely randomly.

Pair Corralation between Beijing HuaYuanYiTong and Cofoe Medical

Assuming the 90 days trading horizon Beijing HuaYuanYiTong is expected to generate 1.76 times less return on investment than Cofoe Medical. In addition to that, Beijing HuaYuanYiTong is 1.57 times more volatile than Cofoe Medical Technology. It trades about 0.01 of its total potential returns per unit of risk. Cofoe Medical Technology is currently generating about 0.04 per unit of volatility. If you would invest  3,692  in Cofoe Medical Technology on September 21, 2024 and sell it today you would earn a total of  85.00  from holding Cofoe Medical Technology or generate 2.3% return on investment over 90 days.

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

Beijing HuaYuanYiTong Thermal  vs.  Cofoe Medical Technology

Beijing HuaYuanYiTong

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Beijing HuaYuanYiTong Thermal are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Beijing HuaYuanYiTong sustained solid returns over the last few months and may actually be approaching a breakup point.

Cofoe Medical Technology

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cofoe Medical Technology are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Cofoe Medical sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Beijing HuaYuanYiTong and Cofoe Medical

The main advantage of trading using opposite Beijing HuaYuanYiTong and Cofoe Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Beijing HuaYuanYiTong 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 Beijing HuaYuanYiTong Thermal 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.