Correlation Between Mingchen Health and Cowealth Medical

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

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

Diversification Opportunities for Mingchen Health and Cowealth Medical

0.74

Correlation Coefficient

Mingchen Health  Cowealth Medical

Poor diversification

The 3 months correlation between Mingchen and Cowealth is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Mingchen Health Co 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 Mingchen Health 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 Mingchen Health Co 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 Mingchen Health i.e., Mingchen Health and Cowealth Medical go up and down completely randomly.

Pair Corralation between Mingchen Health and Cowealth Medical

Assuming the 90 days trading horizon Mingchen Health Co is expected to generate 1.46 times more return on investment than Cowealth Medical. However, Mingchen Health is 1.46 times more volatile than Cowealth Medical China. It trades about 0.02 of its potential returns per unit of risk. Cowealth Medical China is currently generating about -0.01 per unit of risk. If you would invest  1,677  in Mingchen Health Co on December 27, 2024 and sell it today you would earn a total of  10.00  from holding Mingchen Health Co or generate 0.6% return on investment over 90 days.

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

Mingchen Health Co  vs.  Cowealth Medical China

Mingchen Health

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Mingchen Health Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Mingchen Health is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Cowealth Medical China

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cowealth Medical China has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Cowealth Medical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Mingchen Health and Cowealth Medical

The main advantage of trading using opposite Mingchen Health and Cowealth Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mingchen Health 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 Mingchen Health Co 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.