Correlation Between Guizhou Chanhen and Cowealth Medical

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

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

Diversification Opportunities for Guizhou Chanhen and Cowealth Medical

0.88

Correlation Coefficient

Guizhou Chanhen  Cowealth Medical

Very poor diversification

The 3 months correlation between Guizhou and Cowealth is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Guizhou Chanhen Chemical 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 Guizhou Chanhen 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 Guizhou Chanhen Chemical 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 Guizhou Chanhen i.e., Guizhou Chanhen and Cowealth Medical go up and down completely randomly.

Pair Corralation between Guizhou Chanhen and Cowealth Medical

Assuming the 90 days trading horizon Guizhou Chanhen is expected to generate 1.25 times less return on investment than Cowealth Medical. But when comparing it to its historical volatility, Guizhou Chanhen Chemical is 1.19 times less risky than Cowealth Medical. It trades about 0.15 of its potential returns per unit of risk. Cowealth Medical China is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  549.00  in Cowealth Medical China on September 2, 2024 and sell it today you would earn a total of  205.00  from holding Cowealth Medical China or generate 37.34% return on investment over 90 days.

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

Guizhou Chanhen Chemical  vs.  Cowealth Medical China

Guizhou Chanhen Chemical

Risk-Adjusted Performance

11 of 100

Good

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

Cowealth Medical China

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cowealth Medical China are ranked lower than 12 (%) 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 Guizhou Chanhen and Cowealth Medical

The main advantage of trading using opposite Guizhou Chanhen and Cowealth Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guizhou Chanhen 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 Guizhou Chanhen Chemical 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.