Correlation Between Offshore Oil and Beijing Venustech

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

Diversification Opportunities for Offshore Oil and Beijing Venustech

0.87

Correlation Coefficient

Offshore Oil  Beijing Venustech

Very poor diversification

The 3 months correlation between Offshore and Beijing is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Offshore Oil Engineering and Beijing Venustech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijing Venustech 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 Venustech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beijing Venustech has no effect on the direction of Offshore Oil i.e., Offshore Oil and Beijing Venustech go up and down completely randomly.

Pair Corralation between Offshore Oil and Beijing Venustech

Assuming the 90 days trading horizon Offshore Oil is expected to generate 2.42 times less return on investment than Beijing Venustech. But when comparing it to its historical volatility, Offshore Oil Engineering is 1.66 times less risky than Beijing Venustech. It trades about 0.11 of its potential returns per unit of risk. Beijing Venustech is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  1,241  in Beijing Venustech on September 18, 2024 and sell it today you would earn a total of  420.00  from holding Beijing Venustech or generate 33.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.33%
Values	Daily Returns

Offshore Oil Engineering  vs.  Beijing Venustech

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 Venustech

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Beijing Venustech are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Beijing Venustech sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Offshore Oil and Beijing Venustech

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

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