Correlation Between COL Digital and Mingchen Health

Can any of the company-specific risk be diversified away by investing in both COL Digital and Mingchen Health 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 COL Digital and Mingchen Health into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between COL Digital Publishing and Mingchen Health Co, you can compare the effects of market volatilities on COL Digital and Mingchen Health 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 COL Digital with a short position of Mingchen Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of COL Digital and Mingchen Health.

Diversification Opportunities for COL Digital and Mingchen Health

0.87

Correlation Coefficient

COL Digital  Mingchen Health

Very poor diversification

The 3 months correlation between COL and Mingchen is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding COL Digital Publishing and Mingchen Health Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mingchen Health and COL Digital 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 COL Digital Publishing are associated (or correlated) with Mingchen Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mingchen Health has no effect on the direction of COL Digital i.e., COL Digital and Mingchen Health go up and down completely randomly.

Pair Corralation between COL Digital and Mingchen Health

Assuming the 90 days trading horizon COL Digital Publishing is expected to generate 1.78 times more return on investment than Mingchen Health. However, COL Digital is 1.78 times more volatile than Mingchen Health Co. It trades about 0.19 of its potential returns per unit of risk. Mingchen Health Co is currently generating about 0.16 per unit of risk. If you would invest  1,705  in COL Digital Publishing on September 3, 2024 and sell it today you would earn a total of  1,333  from holding COL Digital Publishing or generate 78.18% return on investment over 90 days.

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

COL Digital Publishing  vs.  Mingchen Health Co

COL Digital Publishing

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in COL Digital Publishing are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, COL Digital sustained solid returns over the last few months and may actually be approaching a breakup point.

Mingchen Health

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mingchen Health Co are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Mingchen Health sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with COL Digital and Mingchen Health

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

The idea behind COL Digital Publishing and Mingchen Health 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.