Correlation Between Shanghai Jinfeng and Offshore Oil

Can any of the company-specific risk be diversified away by investing in both Shanghai Jinfeng and Offshore Oil 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 Shanghai Jinfeng and Offshore Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shanghai Jinfeng Wine and Offshore Oil Engineering, you can compare the effects of market volatilities on Shanghai Jinfeng and Offshore Oil 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 Shanghai Jinfeng with a short position of Offshore Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shanghai Jinfeng and Offshore Oil.

Diversification Opportunities for Shanghai Jinfeng and Offshore Oil

-0.08

Correlation Coefficient

Shanghai Jinfeng  Offshore Oil

Good diversification

The 3 months correlation between Shanghai and Offshore is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Jinfeng Wine and Offshore Oil Engineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Offshore Oil Engineering and Shanghai Jinfeng 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 Shanghai Jinfeng Wine are associated (or correlated) with Offshore Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Offshore Oil Engineering has no effect on the direction of Shanghai Jinfeng i.e., Shanghai Jinfeng and Offshore Oil go up and down completely randomly.

Pair Corralation between Shanghai Jinfeng and Offshore Oil

Assuming the 90 days trading horizon Shanghai Jinfeng Wine is expected to generate 1.38 times more return on investment than Offshore Oil. However, Shanghai Jinfeng is 1.38 times more volatile than Offshore Oil Engineering. It trades about -0.01 of its potential returns per unit of risk. Offshore Oil Engineering is currently generating about -0.01 per unit of risk. If you would invest  614.00  in Shanghai Jinfeng Wine on October 9, 2024 and sell it today you would lose (87.00) from holding Shanghai Jinfeng Wine or give up 14.17% of portfolio value over 90 days.

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

Shanghai Jinfeng Wine  vs.  Offshore Oil Engineering

Shanghai Jinfeng Wine

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Jinfeng Wine are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shanghai Jinfeng may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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.

Pair Trading with Shanghai Jinfeng and Offshore Oil

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

The idea behind Shanghai Jinfeng Wine and Offshore Oil Engineering 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..