Correlation Between Offshore Oil and Guangdong Qunxing

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

Diversification Opportunities for Offshore Oil and Guangdong Qunxing

-0.3

Correlation Coefficient

Offshore Oil  Guangdong Qunxing

Very good diversification

The 3 months correlation between Offshore and Guangdong is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Offshore Oil Engineering and Guangdong Qunxing Toys in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Qunxing Toys 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 Guangdong Qunxing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangdong Qunxing Toys has no effect on the direction of Offshore Oil i.e., Offshore Oil and Guangdong Qunxing go up and down completely randomly.

Pair Corralation between Offshore Oil and Guangdong Qunxing

Assuming the 90 days trading horizon Offshore Oil Engineering is expected to under-perform the Guangdong Qunxing. But the stock apears to be less risky and, when comparing its historical volatility, Offshore Oil Engineering is 3.08 times less risky than Guangdong Qunxing. The stock trades about -0.1 of its potential returns per unit of risk. The Guangdong Qunxing Toys is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  707.00  in Guangdong Qunxing Toys on October 26, 2024 and sell it today you would lose (29.00) from holding Guangdong Qunxing Toys or give up 4.1% of portfolio value over 90 days.

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

Offshore Oil Engineering  vs.  Guangdong Qunxing Toys

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.

Guangdong Qunxing Toys

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Guangdong Qunxing Toys are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangdong Qunxing may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Offshore Oil and Guangdong Qunxing

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

The idea behind Offshore Oil Engineering and Guangdong Qunxing Toys 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.