Correlation Between Cofoe Medical and Shenyang Chemical

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

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

Diversification Opportunities for Cofoe Medical and Shenyang Chemical

0.86

Correlation Coefficient

Cofoe Medical  Shenyang Chemical

Very poor diversification

The 3 months correlation between Cofoe and Shenyang is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Cofoe Medical Technology and Shenyang Chemical Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenyang Chemical and Cofoe Medical 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 Cofoe Medical Technology are associated (or correlated) with Shenyang Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenyang Chemical has no effect on the direction of Cofoe Medical i.e., Cofoe Medical and Shenyang Chemical go up and down completely randomly.

Pair Corralation between Cofoe Medical and Shenyang Chemical

Assuming the 90 days trading horizon Cofoe Medical is expected to generate 1.67 times less return on investment than Shenyang Chemical. In addition to that, Cofoe Medical is 1.04 times more volatile than Shenyang Chemical Industry. It trades about 0.11 of its total potential returns per unit of risk. Shenyang Chemical Industry is currently generating about 0.2 per unit of volatility. If you would invest  265.00  in Shenyang Chemical Industry on September 3, 2024 and sell it today you would earn a total of  104.00  from holding Shenyang Chemical Industry or generate 39.25% return on investment over 90 days.

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

Cofoe Medical Technology  vs.  Shenyang Chemical Industry

Cofoe Medical Technology

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cofoe Medical Technology are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Cofoe Medical sustained solid returns over the last few months and may actually be approaching a breakup point.

Shenyang Chemical

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shenyang Chemical Industry are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenyang Chemical sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cofoe Medical and Shenyang Chemical

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

The idea behind Cofoe Medical Technology and Shenyang Chemical Industry 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.