Correlation Between Qingdao Foods and Offshore Oil

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

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

Diversification Opportunities for Qingdao Foods and Offshore Oil

0.32

Correlation Coefficient

Qingdao Foods  Offshore Oil

Weak diversification

The 3 months correlation between Qingdao and Offshore is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Qingdao Foods Co 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 Qingdao Foods 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 Qingdao Foods Co 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 Qingdao Foods i.e., Qingdao Foods and Offshore Oil go up and down completely randomly.

Pair Corralation between Qingdao Foods and Offshore Oil

Assuming the 90 days trading horizon Qingdao Foods Co is expected to under-perform the Offshore Oil. In addition to that, Qingdao Foods is 1.32 times more volatile than Offshore Oil Engineering. It trades about -0.12 of its total potential returns per unit of risk. Offshore Oil Engineering is currently generating about -0.11 per unit of volatility. If you would invest  551.00  in Offshore Oil Engineering on October 25, 2024 and sell it today you would lose (20.00) from holding Offshore Oil Engineering or give up 3.63% of portfolio value over 90 days.

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

Qingdao Foods Co  vs.  Offshore Oil Engineering

Qingdao Foods

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Qingdao Foods Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Qingdao Foods may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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 somewhat strong basic indicators, Offshore Oil is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Qingdao Foods and Offshore Oil

The main advantage of trading using opposite Qingdao Foods and Offshore Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Qingdao Foods 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 Qingdao Foods Co 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.

Check out your portfolio center.

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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.