Correlation Between Offshore Oil and Xiangyang Automobile

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

Diversification Opportunities for Offshore Oil and Xiangyang Automobile

0.52

Correlation Coefficient

Offshore Oil  Xiangyang Automobile

Very weak diversification

The 3 months correlation between Offshore and Xiangyang is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Offshore Oil Engineering and Xiangyang Automobile Bearing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xiangyang Automobile 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 Xiangyang Automobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xiangyang Automobile has no effect on the direction of Offshore Oil i.e., Offshore Oil and Xiangyang Automobile go up and down completely randomly.

Pair Corralation between Offshore Oil and Xiangyang Automobile

Assuming the 90 days trading horizon Offshore Oil Engineering is expected to under-perform the Xiangyang Automobile. But the stock apears to be less risky and, when comparing its historical volatility, Offshore Oil Engineering is 1.95 times less risky than Xiangyang Automobile. The stock trades about -0.01 of its potential returns per unit of risk. The Xiangyang Automobile Bearing is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  429.00  in Xiangyang Automobile Bearing on August 30, 2024 and sell it today you would earn a total of  148.00  from holding Xiangyang Automobile Bearing or generate 34.5% return on investment over 90 days.

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

Offshore Oil Engineering  vs.  Xiangyang Automobile Bearing

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.

Xiangyang Automobile

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Xiangyang Automobile Bearing are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Xiangyang Automobile sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Offshore Oil and Xiangyang Automobile

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

The idea behind Offshore Oil Engineering and Xiangyang Automobile Bearing 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.