Correlation Between Chengdu B and CNOOC

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Can any of the company-specific risk be diversified away by investing in both Chengdu B and CNOOC 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 Chengdu B and CNOOC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chengdu B ray Media and CNOOC Limited, you can compare the effects of market volatilities on Chengdu B and CNOOC 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 Chengdu B with a short position of CNOOC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chengdu B and CNOOC.

Diversification Opportunities for Chengdu B and CNOOC

ChengduCNOOCDiversified AwayChengduCNOOCDiversified Away100%
-0.14
  Correlation Coefficient

Good diversification

The 3 months correlation between Chengdu and CNOOC is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Chengdu B ray Media and CNOOC Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CNOOC Limited and Chengdu B 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 Chengdu B ray Media are associated (or correlated) with CNOOC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CNOOC Limited has no effect on the direction of Chengdu B i.e., Chengdu B and CNOOC go up and down completely randomly.

Pair Corralation between Chengdu B and CNOOC

Assuming the 90 days trading horizon Chengdu B ray Media is expected to generate 2.47 times more return on investment than CNOOC. However, Chengdu B is 2.47 times more volatile than CNOOC Limited. It trades about -0.02 of its potential returns per unit of risk. CNOOC Limited is currently generating about -0.04 per unit of risk. If you would invest  487.00  in Chengdu B ray Media on October 7, 2024 and sell it today you would lose (48.00) from holding Chengdu B ray Media or give up 9.86% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Chengdu B ray Media  vs.  CNOOC Limited

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec 020406080
JavaScript chart by amCharts 3.21.15600880 600938
       Timeline  
Chengdu B ray 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Chengdu B ray Media has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Chengdu B is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan44.555.566.57
CNOOC Limited 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days CNOOC Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, CNOOC is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan25.52626.52727.52828.52929.530

Chengdu B and CNOOC Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-14.24-10.67-7.09-3.520.03.617.2710.9414.61 0.020.040.060.080.100.120.14
JavaScript chart by amCharts 3.21.15600880 600938
       Returns  

Pair Trading with Chengdu B and CNOOC

The main advantage of trading using opposite Chengdu B and CNOOC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chengdu B position performs unexpectedly, CNOOC 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 CNOOC will offset losses from the drop in CNOOC's long position.
The idea behind Chengdu B ray Media and CNOOC Limited 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.

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