Correlation Between CNOOC and Xiamen Faratronic

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

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

Diversification Opportunities for CNOOC and Xiamen Faratronic

-0.76

Correlation Coefficient

CNOOC  Xiamen Faratronic

Pay attention - limited upside

The 3 months correlation between CNOOC and Xiamen is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding CNOOC Limited and Xiamen Faratronic Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xiamen Faratronic 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 Xiamen Faratronic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xiamen Faratronic has no effect on the direction of CNOOC i.e., CNOOC and Xiamen Faratronic go up and down completely randomly.

Pair Corralation between CNOOC and Xiamen Faratronic

Assuming the 90 days trading horizon CNOOC Limited is expected to generate 0.75 times more return on investment than Xiamen Faratronic. However, CNOOC Limited is 1.33 times less risky than Xiamen Faratronic. It trades about 0.09 of its potential returns per unit of risk. Xiamen Faratronic Co is currently generating about -0.01 per unit of risk. If you would invest  1,396  in CNOOC Limited on October 8, 2024 and sell it today you would earn a total of  1,469  from holding CNOOC Limited or generate 105.23% return on investment over 90 days.

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

CNOOC Limited  vs.  Xiamen Faratronic Co

CNOOC Limited

Risk-Adjusted Performance

0 of 100

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.

Xiamen Faratronic

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Xiamen Faratronic Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Xiamen Faratronic may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with CNOOC and Xiamen Faratronic

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

The idea behind CNOOC Limited and Xiamen Faratronic Co 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.