Correlation Between CNOOC and Ningxia Xiaoming

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

By analyzing existing cross correlation between CNOOC Limited and Ningxia Xiaoming Agriculture, you can compare the effects of market volatilities on CNOOC and Ningxia Xiaoming 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 CNOOC with a short position of Ningxia Xiaoming. Check out your portfolio center. Please also check ongoing floating volatility patterns of CNOOC and Ningxia Xiaoming.

Diversification Opportunities for CNOOC and Ningxia Xiaoming

-0.45

Correlation Coefficient

CNOOC  Ningxia Xiaoming

Very good diversification

The 3 months correlation between CNOOC and Ningxia is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding CNOOC Limited and Ningxia Xiaoming Agriculture in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ningxia Xiaoming Agr and CNOOC 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 CNOOC Limited are associated (or correlated) with Ningxia Xiaoming. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ningxia Xiaoming Agr has no effect on the direction of CNOOC i.e., CNOOC and Ningxia Xiaoming go up and down completely randomly.

Pair Corralation between CNOOC and Ningxia Xiaoming

Assuming the 90 days trading horizon CNOOC Limited is expected to generate 0.47 times more return on investment than Ningxia Xiaoming. However, CNOOC Limited is 2.12 times less risky than Ningxia Xiaoming. It trades about 0.19 of its potential returns per unit of risk. Ningxia Xiaoming Agriculture is currently generating about -0.24 per unit of risk. If you would invest  2,724  in CNOOC Limited on October 9, 2024 and sell it today you would earn a total of  150.00  from holding CNOOC Limited or generate 5.51% return on investment over 90 days.

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

CNOOC Limited  vs.  Ningxia Xiaoming Agriculture

CNOOC Limited

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CNOOC Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Ningxia Xiaoming Agr

Risk-Adjusted Performance

2 of 100

Weak

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

Pair Trading with CNOOC and Ningxia Xiaoming

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

The idea behind CNOOC Limited and Ningxia Xiaoming Agriculture 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.