Correlation Between Cloud Air and Cots Technology

Can any of the company-specific risk be diversified away by investing in both Cloud Air and Cots Technology 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 Cloud Air and Cots Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cloud Air CoLtd and Cots Technology Co, you can compare the effects of market volatilities on Cloud Air and Cots Technology 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 Cloud Air with a short position of Cots Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cloud Air and Cots Technology.

Diversification Opportunities for Cloud Air and Cots Technology

0.46

Correlation Coefficient

Cloud Air  Cots Technology

Very weak diversification

The 3 months correlation between Cloud and Cots is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Cloud Air CoLtd and Cots Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cots Technology and Cloud Air 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 Cloud Air CoLtd are associated (or correlated) with Cots Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cots Technology has no effect on the direction of Cloud Air i.e., Cloud Air and Cots Technology go up and down completely randomly.

Pair Corralation between Cloud Air and Cots Technology

Assuming the 90 days trading horizon Cloud Air is expected to generate 2.32 times less return on investment than Cots Technology. But when comparing it to its historical volatility, Cloud Air CoLtd is 1.58 times less risky than Cots Technology. It trades about 0.05 of its potential returns per unit of risk. Cots Technology Co is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,481,000  in Cots Technology Co on December 30, 2024 and sell it today you would earn a total of  149,000  from holding Cots Technology Co or generate 10.06% return on investment over 90 days.

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

Cloud Air CoLtd  vs.  Cots Technology Co

Cloud Air CoLtd

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cloud Air CoLtd are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Cloud Air is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Cots Technology

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cots Technology Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Cots Technology sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cloud Air and Cots Technology

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

The idea behind Cloud Air CoLtd and Cots Technology Co 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.