Correlation Between Changzhou Almaden and Offshore Oil

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

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

Diversification Opportunities for Changzhou Almaden and Offshore Oil

0.08

Correlation Coefficient

Changzhou Almaden  Offshore Oil

Significant diversification

The 3 months correlation between Changzhou and Offshore is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Changzhou Almaden 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 Changzhou Almaden 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 Changzhou Almaden 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 Changzhou Almaden i.e., Changzhou Almaden and Offshore Oil go up and down completely randomly.

Pair Corralation between Changzhou Almaden and Offshore Oil

Assuming the 90 days trading horizon Changzhou Almaden Co is expected to under-perform the Offshore Oil. But the stock apears to be less risky and, when comparing its historical volatility, Changzhou Almaden Co is 1.01 times less risky than Offshore Oil. The stock trades about -0.04 of its potential returns per unit of risk. The Offshore Oil Engineering is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  556.00  in Offshore Oil Engineering on December 28, 2024 and sell it today you would earn a total of  22.00  from holding Offshore Oil Engineering or generate 3.96% return on investment over 90 days.

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

Changzhou Almaden Co  vs.  Offshore Oil Engineering

Changzhou Almaden

Risk-Adjusted Performance

Very Weak

Over the last 90 days Changzhou Almaden Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Changzhou Almaden 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

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Offshore Oil Engineering are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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 Changzhou Almaden and Offshore Oil

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

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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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.