Correlation Between Offshore Oil and Beijing Yanjing

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

Diversification Opportunities for Offshore Oil and Beijing Yanjing

0.89

Correlation Coefficient

Offshore Oil  Beijing Yanjing

Very poor diversification

The 3 months correlation between Offshore and Beijing is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Offshore Oil Engineering and Beijing Yanjing Brewery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijing Yanjing Brewery 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 Beijing Yanjing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beijing Yanjing Brewery has no effect on the direction of Offshore Oil i.e., Offshore Oil and Beijing Yanjing go up and down completely randomly.

Pair Corralation between Offshore Oil and Beijing Yanjing

Assuming the 90 days trading horizon Offshore Oil is expected to generate 1.25 times less return on investment than Beijing Yanjing. But when comparing it to its historical volatility, Offshore Oil Engineering is 1.18 times less risky than Beijing Yanjing. It trades about 0.11 of its potential returns per unit of risk. Beijing Yanjing Brewery is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  925.00  in Beijing Yanjing Brewery on September 12, 2024 and sell it today you would earn a total of  157.00  from holding Beijing Yanjing Brewery or generate 16.97% return on investment over 90 days.

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

Offshore Oil Engineering  vs.  Beijing Yanjing Brewery

Offshore Oil Engineering

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Offshore Oil Engineering are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Offshore Oil sustained solid returns over the last few months and may actually be approaching a breakup point.

Beijing Yanjing Brewery

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Beijing Yanjing Brewery are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Beijing Yanjing sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Offshore Oil and Beijing Yanjing

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

The idea behind Offshore Oil Engineering and Beijing Yanjing Brewery 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.

Check out your portfolio center.

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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..