Correlation Between Xingguang Agricultural and Cowealth Medical

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

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

Diversification Opportunities for Xingguang Agricultural and Cowealth Medical

0.85

Correlation Coefficient

Xingguang Agricultural  Cowealth Medical

Very poor diversification

The 3 months correlation between Xingguang and Cowealth is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Xingguang Agricultural Mach and Cowealth Medical China in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cowealth Medical China and Xingguang Agricultural 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 Xingguang Agricultural Mach are associated (or correlated) with Cowealth Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cowealth Medical China has no effect on the direction of Xingguang Agricultural i.e., Xingguang Agricultural and Cowealth Medical go up and down completely randomly.

Pair Corralation between Xingguang Agricultural and Cowealth Medical

Assuming the 90 days trading horizon Xingguang Agricultural Mach is expected to under-perform the Cowealth Medical. In addition to that, Xingguang Agricultural is 2.0 times more volatile than Cowealth Medical China. It trades about -0.27 of its total potential returns per unit of risk. Cowealth Medical China is currently generating about -0.36 per unit of volatility. If you would invest  801.00  in Cowealth Medical China on October 9, 2024 and sell it today you would lose (135.00) from holding Cowealth Medical China or give up 16.85% of portfolio value over 90 days.

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

Xingguang Agricultural Mach  vs.  Cowealth Medical China

Xingguang Agricultural

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Xingguang Agricultural Mach are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Xingguang Agricultural may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Cowealth Medical China

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cowealth Medical China are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with Xingguang Agricultural and Cowealth Medical

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

The idea behind Xingguang Agricultural Mach and Cowealth Medical China 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.