Correlation Between Offshore Oil and Guilin Seamild

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

Diversification Opportunities for Offshore Oil and Guilin Seamild

0.44

Correlation Coefficient

Offshore Oil  Guilin Seamild

Very weak diversification

The 3 months correlation between Offshore and Guilin is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Offshore Oil Engineering and Guilin Seamild Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guilin Seamild 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 Guilin Seamild. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guilin Seamild Foods has no effect on the direction of Offshore Oil i.e., Offshore Oil and Guilin Seamild go up and down completely randomly.

Pair Corralation between Offshore Oil and Guilin Seamild

Assuming the 90 days trading horizon Offshore Oil Engineering is expected to generate 0.69 times more return on investment than Guilin Seamild. However, Offshore Oil Engineering is 1.44 times less risky than Guilin Seamild. It trades about 0.12 of its potential returns per unit of risk. Guilin Seamild Foods is currently generating about -0.01 per unit of risk. If you would invest  546.00  in Offshore Oil Engineering on December 26, 2024 and sell it today you would earn a total of  64.00  from holding Offshore Oil Engineering or generate 11.72% 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.  Guilin Seamild Foods

Offshore Oil Engineering

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Offshore Oil Engineering are ranked lower than 9 (%) 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.

Guilin Seamild Foods

Risk-Adjusted Performance

Very Weak

Over the last 90 days Guilin Seamild Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Guilin Seamild is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Offshore Oil and Guilin Seamild

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

The idea behind Offshore Oil Engineering and Guilin Seamild Foods 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.