Correlation Between Changchun and CSSC Offshore

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

By analyzing existing cross correlation between Changchun UP Optotech and CSSC Offshore Marine, you can compare the effects of market volatilities on Changchun and CSSC Offshore 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 Changchun with a short position of CSSC Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of Changchun and CSSC Offshore.

Diversification Opportunities for Changchun and CSSC Offshore

0.3

Correlation Coefficient

Changchun  CSSC Offshore

Weak diversification

The 3 months correlation between Changchun and CSSC is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Changchun UP Optotech and CSSC Offshore Marine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSSC Offshore Marine and Changchun 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 Changchun UP Optotech are associated (or correlated) with CSSC Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSSC Offshore Marine has no effect on the direction of Changchun i.e., Changchun and CSSC Offshore go up and down completely randomly.

Pair Corralation between Changchun and CSSC Offshore

Assuming the 90 days trading horizon Changchun UP Optotech is expected to generate 1.47 times more return on investment than CSSC Offshore. However, Changchun is 1.47 times more volatile than CSSC Offshore Marine. It trades about 0.05 of its potential returns per unit of risk. CSSC Offshore Marine is currently generating about 0.02 per unit of risk. If you would invest  2,123  in Changchun UP Optotech on October 9, 2024 and sell it today you would earn a total of  1,426  from holding Changchun UP Optotech or generate 67.17% return on investment over 90 days.

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

Changchun UP Optotech  vs.  CSSC Offshore Marine

Changchun UP Optotech

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Changchun UP Optotech are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Changchun is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

CSSC Offshore Marine

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CSSC Offshore Marine 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 Changchun and CSSC Offshore

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

The idea behind Changchun UP Optotech and CSSC Offshore Marine 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.