Correlation Between Citic Offshore and Offshore Oil

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

By analyzing existing cross correlation between Citic Offshore Helicopter and Offshore Oil Engineering, you can compare the effects of market volatilities on Citic Offshore and Offshore Oil 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 Citic Offshore with a short position of Offshore Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citic Offshore and Offshore Oil.

Diversification Opportunities for Citic Offshore and Offshore Oil

0.07

Correlation Coefficient

Citic Offshore  Offshore Oil

Significant diversification

The 3 months correlation between Citic and Offshore is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Citic Offshore Helicopter and Offshore Oil Engineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Offshore Oil Engineering and Citic Offshore 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 Citic Offshore Helicopter are associated (or correlated) with Offshore Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Offshore Oil Engineering has no effect on the direction of Citic Offshore i.e., Citic Offshore and Offshore Oil go up and down completely randomly.

Pair Corralation between Citic Offshore and Offshore Oil

Assuming the 90 days trading horizon Citic Offshore Helicopter is expected to generate 2.98 times more return on investment than Offshore Oil. However, Citic Offshore is 2.98 times more volatile than Offshore Oil Engineering. It trades about 0.08 of its potential returns per unit of risk. Offshore Oil Engineering is currently generating about -0.11 per unit of risk. If you would invest  2,035  in Citic Offshore Helicopter on October 5, 2024 and sell it today you would earn a total of  408.00  from holding Citic Offshore Helicopter or generate 20.05% return on investment over 90 days.

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

Citic Offshore Helicopter  vs.  Offshore Oil Engineering

Citic Offshore Helicopter

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Citic Offshore Helicopter are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Citic Offshore sustained solid returns over the last few months and may actually be approaching a breakup point.

Offshore Oil Engineering

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Offshore Oil Engineering has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Citic Offshore and Offshore Oil

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

The idea behind Citic Offshore Helicopter and Offshore Oil Engineering 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.