Correlation Between Cofoe Medical and Air China

Can any of the company-specific risk be diversified away by investing in both Cofoe Medical and Air China 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 Air China 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 Air China Ltd, you can compare the effects of market volatilities on Cofoe Medical and Air China 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 Air China. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cofoe Medical and Air China.

Diversification Opportunities for Cofoe Medical and Air China

0.68

Correlation Coefficient

Cofoe Medical  Air China

Poor diversification

The 3 months correlation between Cofoe and Air is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Cofoe Medical Technology and Air China Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air China 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 Air China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air China has no effect on the direction of Cofoe Medical i.e., Cofoe Medical and Air China go up and down completely randomly.

Pair Corralation between Cofoe Medical and Air China

Assuming the 90 days trading horizon Cofoe Medical Technology is expected to under-perform the Air China. But the stock apears to be less risky and, when comparing its historical volatility, Cofoe Medical Technology is 1.28 times less risky than Air China. The stock trades about -0.04 of its potential returns per unit of risk. The Air China Ltd is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  787.00  in Air China Ltd on September 22, 2024 and sell it today you would earn a total of  10.00  from holding Air China Ltd or generate 1.27% return on investment over 90 days.

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

Cofoe Medical Technology  vs.  Air China Ltd

Cofoe Medical Technology

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cofoe Medical Technology are ranked lower than 11 (%) 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.

Air China

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Air China Ltd are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Air China sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cofoe Medical and Air China

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

The idea behind Cofoe Medical Technology and Air China Ltd 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.