Correlation Between Penyao Environmental and Cowealth Medical

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

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

Diversification Opportunities for Penyao Environmental and Cowealth Medical

0.52

Correlation Coefficient

Penyao Environmental  Cowealth Medical

Very weak diversification

The 3 months correlation between Penyao and Cowealth is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Penyao Environmental Protectio 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 Penyao Environmental 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 Penyao Environmental Protection 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 Penyao Environmental i.e., Penyao Environmental and Cowealth Medical go up and down completely randomly.

Pair Corralation between Penyao Environmental and Cowealth Medical

Assuming the 90 days trading horizon Penyao Environmental Protection is expected to generate 1.37 times more return on investment than Cowealth Medical. However, Penyao Environmental is 1.37 times more volatile than Cowealth Medical China. It trades about -0.13 of its potential returns per unit of risk. Cowealth Medical China is currently generating about -0.41 per unit of risk. If you would invest  590.00  in Penyao Environmental Protection on October 8, 2024 and sell it today you would lose (55.00) from holding Penyao Environmental Protection or give up 9.32% of portfolio value over 90 days.

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

Penyao Environmental Protectio  vs.  Cowealth Medical China

Penyao Environmental

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Penyao Environmental Protection has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Penyao Environmental 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

0 of 100

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 Penyao Environmental and Cowealth Medical

The main advantage of trading using opposite Penyao Environmental and Cowealth Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Penyao Environmental 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 Penyao Environmental Protection 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.