Correlation Between Shuhua Sports and Cowealth Medical

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

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

Diversification Opportunities for Shuhua Sports and Cowealth Medical

0.42

Correlation Coefficient

Shuhua Sports  Cowealth Medical

Very weak diversification

The 3 months correlation between Shuhua and Cowealth is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Shuhua Sports Co 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 Shuhua Sports 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 Shuhua Sports Co 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 Shuhua Sports i.e., Shuhua Sports and Cowealth Medical go up and down completely randomly.

Pair Corralation between Shuhua Sports and Cowealth Medical

Assuming the 90 days trading horizon Shuhua Sports Co is expected to generate 0.88 times more return on investment than Cowealth Medical. However, Shuhua Sports Co is 1.14 times less risky than Cowealth Medical. It trades about 0.0 of its potential returns per unit of risk. Cowealth Medical China is currently generating about -0.02 per unit of risk. If you would invest  1,011  in Shuhua Sports Co on October 12, 2024 and sell it today you would lose (139.00) from holding Shuhua Sports Co or give up 13.75% of portfolio value over 90 days.

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

Shuhua Sports Co  vs.  Cowealth Medical China

Shuhua Sports

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shuhua Sports Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shuhua Sports sustained solid returns over the last few months and may actually be approaching a breakup point.

Cowealth Medical China

Risk-Adjusted Performance

2 of 100

Insignificant

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 weak basic indicators, Cowealth Medical may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Shuhua Sports and Cowealth Medical

The main advantage of trading using opposite Shuhua Sports and Cowealth Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shuhua Sports 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 Shuhua Sports Co 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.