Correlation Between Jilin Chemical and Offshore Oil

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

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

Diversification Opportunities for Jilin Chemical and Offshore Oil

0.12

Correlation Coefficient

Jilin Chemical  Offshore Oil

Average diversification

The 3 months correlation between Jilin and Offshore is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Jilin Chemical Fibre 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 Jilin 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 Jilin Chemical Fibre 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 Jilin Chemical i.e., Jilin Chemical and Offshore Oil go up and down completely randomly.

Pair Corralation between Jilin Chemical and Offshore Oil

Assuming the 90 days trading horizon Jilin Chemical Fibre is expected to generate 1.54 times more return on investment than Offshore Oil. However, Jilin Chemical is 1.54 times more volatile than Offshore Oil Engineering. It trades about 0.03 of its potential returns per unit of risk. Offshore Oil Engineering is currently generating about -0.01 per unit of risk. If you would invest  312.00  in Jilin Chemical Fibre on October 7, 2024 and sell it today you would earn a total of  25.00  from holding Jilin Chemical Fibre or generate 8.01% return on investment over 90 days.

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

Jilin Chemical Fibre  vs.  Offshore Oil Engineering

Jilin Chemical Fibre

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jilin Chemical Fibre has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Jilin Chemical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 Jilin Chemical and Offshore Oil

The main advantage of trading using opposite Jilin Chemical and Offshore Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Jilin Chemical 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 Jilin Chemical Fibre 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.