Correlation Between Cowealth Medical and CNOOC

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

Diversification Opportunities for Cowealth Medical and CNOOC

-0.51

Correlation Coefficient

Cowealth Medical  CNOOC

Excellent diversification

The 3 months correlation between Cowealth and CNOOC is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Cowealth Medical China and CNOOC Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CNOOC Limited 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 CNOOC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CNOOC Limited has no effect on the direction of Cowealth Medical i.e., Cowealth Medical and CNOOC go up and down completely randomly.

Pair Corralation between Cowealth Medical and CNOOC

Assuming the 90 days trading horizon Cowealth Medical China is expected to generate 1.81 times more return on investment than CNOOC. However, Cowealth Medical is 1.81 times more volatile than CNOOC Limited. It trades about -0.01 of its potential returns per unit of risk. CNOOC Limited is currently generating about -0.13 per unit of risk. If you would invest  723.00  in Cowealth Medical China on December 25, 2024 and sell it today you would lose (20.00) from holding Cowealth Medical China or give up 2.77% of portfolio value over 90 days.

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

Cowealth Medical China  vs.  CNOOC Limited

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.

CNOOC Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days CNOOC Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Cowealth Medical and CNOOC

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

The idea behind Cowealth Medical China and CNOOC Limited 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.