Correlation Between Offshore Oil and HaiXin Foods

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

Diversification Opportunities for Offshore Oil and HaiXin Foods

0.03

Correlation Coefficient

Offshore Oil  HaiXin Foods

Significant diversification

The 3 months correlation between Offshore and HaiXin is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Offshore Oil Engineering and HaiXin Foods Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HaiXin Foods 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 HaiXin Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HaiXin Foods has no effect on the direction of Offshore Oil i.e., Offshore Oil and HaiXin Foods go up and down completely randomly.

Pair Corralation between Offshore Oil and HaiXin Foods

Assuming the 90 days trading horizon Offshore Oil Engineering is expected to under-perform the HaiXin Foods. But the stock apears to be less risky and, when comparing its historical volatility, Offshore Oil Engineering is 3.37 times less risky than HaiXin Foods. The stock trades about -0.03 of its potential returns per unit of risk. The HaiXin Foods Co is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  370.00  in HaiXin Foods Co on October 25, 2024 and sell it today you would earn a total of  37.00  from holding HaiXin Foods Co or generate 10.0% return on investment over 90 days.

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

Offshore Oil Engineering  vs.  HaiXin Foods Co

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.

HaiXin Foods

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in HaiXin Foods Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, HaiXin Foods sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Offshore Oil and HaiXin Foods

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

The idea behind Offshore Oil Engineering and HaiXin Foods Co 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.