Correlation Between Cowealth Medical and Midea Group

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

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

Diversification Opportunities for Cowealth Medical and Midea Group

-0.21

Correlation Coefficient

Cowealth Medical  Midea Group

Very good diversification

The 3 months correlation between Cowealth and Midea is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Cowealth Medical China and Midea Group Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Midea Group and Cowealth 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 Cowealth Medical China are associated (or correlated) with Midea Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Midea Group has no effect on the direction of Cowealth Medical i.e., Cowealth Medical and Midea Group go up and down completely randomly.

Pair Corralation between Cowealth Medical and Midea Group

Assuming the 90 days trading horizon Cowealth Medical China is expected to under-perform the Midea Group. In addition to that, Cowealth Medical is 1.51 times more volatile than Midea Group Co. It trades about -0.01 of its total potential returns per unit of risk. Midea Group Co is currently generating about 0.02 per unit of volatility. If you would invest  7,598  in Midea Group Co on December 26, 2024 and sell it today you would earn a total of  88.00  from holding Midea Group Co or generate 1.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.28%
Values	Daily Returns

Cowealth Medical China  vs.  Midea Group Co

Cowealth Medical China

Risk-Adjusted Performance

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.

Midea Group

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Midea Group Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Midea Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Cowealth Medical and Midea Group

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

The idea behind Cowealth Medical China and Midea Group Co 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.