Correlation Between Xinjiang Baodi and CNOOC

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

Diversification Opportunities for Xinjiang Baodi and CNOOC

0.1
  Correlation Coefficient

Average diversification

The 3 months correlation between Xinjiang and CNOOC is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Xinjiang Baodi Mining and CNOOC Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CNOOC Limited and Xinjiang Baodi 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 Xinjiang Baodi Mining 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 Xinjiang Baodi i.e., Xinjiang Baodi and CNOOC go up and down completely randomly.

Pair Corralation between Xinjiang Baodi and CNOOC

Assuming the 90 days trading horizon Xinjiang Baodi Mining is expected to generate 1.24 times more return on investment than CNOOC. However, Xinjiang Baodi is 1.24 times more volatile than CNOOC Limited. It trades about 0.17 of its potential returns per unit of risk. CNOOC Limited is currently generating about 0.04 per unit of risk. If you would invest  536.00  in Xinjiang Baodi Mining on September 23, 2024 and sell it today you would earn a total of  159.00  from holding Xinjiang Baodi Mining or generate 29.66% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Xinjiang Baodi Mining  vs.  CNOOC Limited

 Performance 
       Timeline  
Xinjiang Baodi Mining 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Xinjiang Baodi Mining are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Xinjiang Baodi sustained solid returns over the last few months and may actually be approaching a breakup point.
CNOOC Limited 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
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.

Xinjiang Baodi and CNOOC Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Xinjiang Baodi and CNOOC

The main advantage of trading using opposite Xinjiang Baodi and CNOOC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xinjiang Baodi 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 Xinjiang Baodi Mining 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.

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