Correlation Between Zoy Home and CNOOC

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

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

Diversification Opportunities for Zoy Home and CNOOC

-0.62

Correlation Coefficient

Zoy Home  CNOOC

Excellent diversification

The 3 months correlation between Zoy and CNOOC is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Zoy Home Furnishing and CNOOC Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CNOOC Limited and Zoy Home 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 Zoy Home Furnishing 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 Zoy Home i.e., Zoy Home and CNOOC go up and down completely randomly.

Pair Corralation between Zoy Home and CNOOC

Assuming the 90 days trading horizon Zoy Home Furnishing is expected to generate 2.69 times more return on investment than CNOOC. However, Zoy Home is 2.69 times more volatile than CNOOC Limited. It trades about -0.03 of its potential returns per unit of risk. CNOOC Limited is currently generating about -0.19 per unit of risk. If you would invest  1,091  in Zoy Home Furnishing on December 30, 2024 and sell it today you would lose (87.00) from holding Zoy Home Furnishing or give up 7.97% of portfolio value over 90 days.

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

Zoy Home Furnishing  vs.  CNOOC Limited

Zoy Home Furnishing

Risk-Adjusted Performance

Very Weak

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

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 weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Zoy Home and CNOOC

The main advantage of trading using opposite Zoy Home and CNOOC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zoy Home 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 Zoy Home Furnishing 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.

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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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.