Correlation Between Li Peng and Cowealth Medical

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

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

Diversification Opportunities for Li Peng and Cowealth Medical

0.06

Correlation Coefficient

Li Peng  Cowealth Medical

Significant diversification

The 3 months correlation between 1447 and Cowealth is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Li Peng Enterprise and Cowealth Medical Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cowealth Medical Holding and Li Peng 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 Li Peng Enterprise 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 Holding has no effect on the direction of Li Peng i.e., Li Peng and Cowealth Medical go up and down completely randomly.

Pair Corralation between Li Peng and Cowealth Medical

Assuming the 90 days trading horizon Li Peng Enterprise is expected to under-perform the Cowealth Medical. But the stock apears to be less risky and, when comparing its historical volatility, Li Peng Enterprise is 1.45 times less risky than Cowealth Medical. The stock trades about -0.07 of its potential returns per unit of risk. The Cowealth Medical Holding is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  2,105  in Cowealth Medical Holding on September 5, 2024 and sell it today you would lose (40.00) from holding Cowealth Medical Holding or give up 1.9% of portfolio value over 90 days.

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

Li Peng Enterprise  vs.  Cowealth Medical Holding

Li Peng Enterprise

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Li Peng Enterprise has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Li Peng is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Cowealth Medical Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cowealth Medical Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Cowealth Medical is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Li Peng and Cowealth Medical

The main advantage of trading using opposite Li Peng and Cowealth Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Li Peng 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 Li Peng Enterprise and Cowealth Medical Holding 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.