Correlation Between Everlight Chemical and Cowealth Medical

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

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

Diversification Opportunities for Everlight Chemical and Cowealth Medical

0.59

Correlation Coefficient

Everlight Chemical  Cowealth Medical

Very weak diversification

The 3 months correlation between Everlight and Cowealth is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Everlight Chemical Industrial and Cowealth Medical Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cowealth Medical Holding and Everlight Chemical 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 Everlight Chemical Industrial 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 Holding has no effect on the direction of Everlight Chemical i.e., Everlight Chemical and Cowealth Medical go up and down completely randomly.

Pair Corralation between Everlight Chemical and Cowealth Medical

Assuming the 90 days trading horizon Everlight Chemical Industrial is expected to generate 1.71 times more return on investment than Cowealth Medical. However, Everlight Chemical is 1.71 times more volatile than Cowealth Medical Holding. It trades about 0.04 of its potential returns per unit of risk. Cowealth Medical Holding is currently generating about -0.05 per unit of risk. If you would invest  1,940  in Everlight Chemical Industrial on September 22, 2024 and sell it today you would earn a total of  200.00  from holding Everlight Chemical Industrial or generate 10.31% return on investment over 90 days.

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

Everlight Chemical Industrial  vs.  Cowealth Medical Holding

Everlight Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Everlight Chemical Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Cowealth Medical Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cowealth Medical Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Cowealth Medical is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Everlight Chemical and Cowealth Medical

The main advantage of trading using opposite Everlight Chemical and Cowealth Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Everlight Chemical 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 Everlight Chemical Industrial and Cowealth Medical Holding 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.