Correlation Between Cochlear and Shandong Weigao

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

By analyzing existing cross correlation between Cochlear Limited and Shandong Weigao Group, you can compare the effects of market volatilities on Cochlear and Shandong Weigao 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 Cochlear with a short position of Shandong Weigao. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cochlear and Shandong Weigao.

Diversification Opportunities for Cochlear and Shandong Weigao

0.0

Correlation Coefficient

Cochlear  Shandong Weigao

Pay attention - limited upside

The 3 months correlation between Cochlear and Shandong is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Cochlear Limited and Shandong Weigao Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shandong Weigao Group and Cochlear 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 Cochlear Limited are associated (or correlated) with Shandong Weigao. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shandong Weigao Group has no effect on the direction of Cochlear i.e., Cochlear and Shandong Weigao go up and down completely randomly.

Pair Corralation between Cochlear and Shandong Weigao

If you would invest  20,025  in Cochlear Limited on February 2, 2024 and sell it today you would earn a total of  775.00  from holding Cochlear Limited or generate 3.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Cochlear Limited  vs.  Shandong Weigao Group

Cochlear Limited

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cochlear Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Cochlear is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Shandong Weigao Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shandong Weigao Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Shandong Weigao is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Cochlear and Shandong Weigao

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

The idea behind Cochlear Limited and Shandong Weigao Group 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.