Correlation Between CNOOC and Highbroad Advanced

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

By analyzing existing cross correlation between CNOOC Limited and Highbroad Advanced Material, you can compare the effects of market volatilities on CNOOC and Highbroad Advanced 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 Highbroad Advanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of CNOOC and Highbroad Advanced.

Diversification Opportunities for CNOOC and Highbroad Advanced

-0.79

Correlation Coefficient

CNOOC  Highbroad Advanced

Pay attention - limited upside

The 3 months correlation between CNOOC and Highbroad is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding CNOOC Limited and Highbroad Advanced Material in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highbroad Advanced 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 Highbroad Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Highbroad Advanced has no effect on the direction of CNOOC i.e., CNOOC and Highbroad Advanced go up and down completely randomly.

Pair Corralation between CNOOC and Highbroad Advanced

Assuming the 90 days trading horizon CNOOC Limited is expected to under-perform the Highbroad Advanced. But the stock apears to be less risky and, when comparing its historical volatility, CNOOC Limited is 2.3 times less risky than Highbroad Advanced. The stock trades about -0.13 of its potential returns per unit of risk. The Highbroad Advanced Material is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  1,518  in Highbroad Advanced Material on December 26, 2024 and sell it today you would lose (85.00) from holding Highbroad Advanced Material or give up 5.6% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.28%
Values	Daily Returns

CNOOC Limited  vs.  Highbroad Advanced Material

CNOOC Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days CNOOC Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Highbroad Advanced

Risk-Adjusted Performance

Very Weak

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

Pair Trading with CNOOC and Highbroad Advanced

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

The idea behind CNOOC Limited and Highbroad Advanced Material 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.