Correlation Between Offshore Oil and North Huajin

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

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

Diversification Opportunities for Offshore Oil and North Huajin

0.28

Correlation Coefficient

Offshore Oil  North Huajin

Modest diversification

The 3 months correlation between Offshore and North is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Offshore Oil Engineering and North Huajin Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North Huajin Chemical and Offshore Oil 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 Offshore Oil Engineering are associated (or correlated) with North Huajin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North Huajin Chemical has no effect on the direction of Offshore Oil i.e., Offshore Oil and North Huajin go up and down completely randomly.

Pair Corralation between Offshore Oil and North Huajin

Assuming the 90 days trading horizon Offshore Oil Engineering is expected to generate 0.91 times more return on investment than North Huajin. However, Offshore Oil Engineering is 1.09 times less risky than North Huajin. It trades about -0.03 of its potential returns per unit of risk. North Huajin Chemical is currently generating about -0.3 per unit of risk. If you would invest  541.00  in Offshore Oil Engineering on October 24, 2024 and sell it today you would lose (6.00) from holding Offshore Oil Engineering or give up 1.11% of portfolio value over 90 days.

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

Offshore Oil Engineering  vs.  North Huajin Chemical

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.

North Huajin Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days North Huajin Chemical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Offshore Oil and North Huajin

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

The idea behind Offshore Oil Engineering and North Huajin Chemical 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.