Correlation Between Zhongzhu Medical and CNOOC

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

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

Diversification Opportunities for Zhongzhu Medical and CNOOC

-0.6

Correlation Coefficient

Zhongzhu Medical  CNOOC

Excellent diversification

The 3 months correlation between Zhongzhu and CNOOC is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Zhongzhu Medical Holdings and CNOOC Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CNOOC Limited and Zhongzhu Medical 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 Zhongzhu Medical Holdings 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 Zhongzhu Medical i.e., Zhongzhu Medical and CNOOC go up and down completely randomly.

Pair Corralation between Zhongzhu Medical and CNOOC

Assuming the 90 days trading horizon Zhongzhu Medical Holdings is expected to under-perform the CNOOC. In addition to that, Zhongzhu Medical is 1.02 times more volatile than CNOOC Limited. It trades about -0.03 of its total potential returns per unit of risk. CNOOC Limited is currently generating about 0.08 per unit of volatility. If you would invest  1,461  in CNOOC Limited on October 11, 2024 and sell it today you would earn a total of  1,450  from holding CNOOC Limited or generate 99.25% return on investment over 90 days.

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

Zhongzhu Medical Holdings  vs.  CNOOC Limited

Zhongzhu Medical Holdings

Risk-Adjusted Performance

4 of 100

Modest

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

CNOOC Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CNOOC Limited has generated negative risk-adjusted returns adding no value to investors with long positions. 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 Zhongzhu Medical and CNOOC

The main advantage of trading using opposite Zhongzhu Medical and CNOOC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zhongzhu Medical 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 Zhongzhu Medical Holdings 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.