Correlation Between Ningbo MedicalSystem and CNOOC

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

By analyzing existing cross correlation between Ningbo MedicalSystem Biotechnology and CNOOC Limited, you can compare the effects of market volatilities on Ningbo MedicalSystem and CNOOC 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 Ningbo MedicalSystem with a short position of CNOOC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ningbo MedicalSystem and CNOOC.

Diversification Opportunities for Ningbo MedicalSystem and CNOOC

0.37

Correlation Coefficient

Ningbo MedicalSystem  CNOOC

Weak diversification

The 3 months correlation between Ningbo and CNOOC is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Ningbo MedicalSystem Biotechno and CNOOC Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CNOOC Limited and Ningbo MedicalSystem 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 Ningbo MedicalSystem Biotechnology are associated (or correlated) with CNOOC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CNOOC Limited has no effect on the direction of Ningbo MedicalSystem i.e., Ningbo MedicalSystem and CNOOC go up and down completely randomly.

Pair Corralation between Ningbo MedicalSystem and CNOOC

Assuming the 90 days trading horizon Ningbo MedicalSystem is expected to generate 1.0 times less return on investment than CNOOC. In addition to that, Ningbo MedicalSystem is 1.72 times more volatile than CNOOC Limited. It trades about 0.11 of its total potential returns per unit of risk. CNOOC Limited is currently generating about 0.18 per unit of volatility. If you would invest  2,621  in CNOOC Limited on September 23, 2024 and sell it today you would earn a total of  119.00  from holding CNOOC Limited or generate 4.54% return on investment over 90 days.

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

Ningbo MedicalSystem Biotechno  vs.  CNOOC Limited

Ningbo MedicalSystem

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ningbo MedicalSystem Biotechnology are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ningbo MedicalSystem sustained solid returns over the last few months and may actually be approaching a breakup point.

CNOOC Limited

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CNOOC Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, CNOOC is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ningbo MedicalSystem and CNOOC

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

The idea behind Ningbo MedicalSystem Biotechnology and CNOOC Limited 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.