Correlation Between Air China and Cofoe Medical

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

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

Diversification Opportunities for Air China and Cofoe Medical

0.53

Correlation Coefficient

Air China  Cofoe Medical

Very weak diversification

The 3 months correlation between Air and Cofoe is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Air China Ltd and Cofoe Medical Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cofoe Medical Technology and Air China 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 Air China Ltd are associated (or correlated) with Cofoe Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cofoe Medical Technology has no effect on the direction of Air China i.e., Air China and Cofoe Medical go up and down completely randomly.

Pair Corralation between Air China and Cofoe Medical

Assuming the 90 days trading horizon Air China Ltd is expected to generate 1.2 times more return on investment than Cofoe Medical. However, Air China is 1.2 times more volatile than Cofoe Medical Technology. It trades about 0.12 of its potential returns per unit of risk. Cofoe Medical Technology is currently generating about -0.04 per unit of risk. If you would invest  733.00  in Air China Ltd on October 1, 2024 and sell it today you would earn a total of  78.00  from holding Air China Ltd or generate 10.64% return on investment over 90 days.

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

Air China Ltd  vs.  Cofoe Medical Technology

Air China

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Air China Ltd are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Air China may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Cofoe Medical Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cofoe Medical Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Air China and Cofoe Medical

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

The idea behind Air China Ltd and Cofoe Medical Technology 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.