Correlation Between Offshore Oil and Jilin Chemical

Can any of the company-specific risk be diversified away by investing in both Offshore Oil and Jilin Chemical 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 Jilin Chemical 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 Jilin Chemical Fibre, you can compare the effects of market volatilities on Offshore Oil and Jilin Chemical 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 Jilin Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Offshore Oil and Jilin Chemical.

Diversification Opportunities for Offshore Oil and Jilin Chemical

0.47

Correlation Coefficient

Offshore Oil  Jilin Chemical

Very weak diversification

The 3 months correlation between Offshore and Jilin is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Offshore Oil Engineering and Jilin Chemical Fibre in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jilin Chemical Fibre 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 Jilin Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jilin Chemical Fibre has no effect on the direction of Offshore Oil i.e., Offshore Oil and Jilin Chemical go up and down completely randomly.

Pair Corralation between Offshore Oil and Jilin Chemical

Assuming the 90 days trading horizon Offshore Oil is expected to generate 3.89 times less return on investment than Jilin Chemical. But when comparing it to its historical volatility, Offshore Oil Engineering is 2.44 times less risky than Jilin Chemical. It trades about 0.02 of its potential returns per unit of risk. Jilin Chemical Fibre is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  336.00  in Jilin Chemical Fibre on October 22, 2024 and sell it today you would earn a total of  13.00  from holding Jilin Chemical Fibre or generate 3.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Offshore Oil Engineering  vs.  Jilin Chemical Fibre

Offshore Oil Engineering

Risk-Adjusted Performance

1 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Offshore Oil Engineering are ranked lower than 1 (%) 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.

Jilin Chemical Fibre

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Jilin Chemical Fibre are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jilin Chemical may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Offshore Oil and Jilin Chemical

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

The idea behind Offshore Oil Engineering and Jilin Chemical Fibre 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..