Correlation Between China Conch and Awilco Drilling

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

By analyzing existing cross correlation between China Conch Venture and Awilco Drilling PLC, you can compare the effects of market volatilities on China Conch and Awilco Drilling 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 China Conch with a short position of Awilco Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Conch and Awilco Drilling.

Diversification Opportunities for China Conch and Awilco Drilling

-0.74

Correlation Coefficient

China Conch  Awilco Drilling

Pay attention - limited upside

The 3 months correlation between China and Awilco is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding China Conch Venture and Awilco Drilling PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Awilco Drilling PLC and China Conch 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 China Conch Venture are associated (or correlated) with Awilco Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Awilco Drilling PLC has no effect on the direction of China Conch i.e., China Conch and Awilco Drilling go up and down completely randomly.

Pair Corralation between China Conch and Awilco Drilling

Assuming the 90 days horizon China Conch is expected to generate 60.45 times less return on investment than Awilco Drilling. But when comparing it to its historical volatility, China Conch Venture is 10.68 times less risky than Awilco Drilling. It trades about 0.01 of its potential returns per unit of risk. Awilco Drilling PLC is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,000.00  in Awilco Drilling PLC on October 21, 2024 and sell it today you would lose (819.00) from holding Awilco Drilling PLC or give up 81.9% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.6%
Values	Daily Returns

China Conch Venture  vs.  Awilco Drilling PLC

China Conch Venture

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China Conch Venture are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, China Conch reported solid returns over the last few months and may actually be approaching a breakup point.

Awilco Drilling PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Awilco Drilling PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with China Conch and Awilco Drilling

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

The idea behind China Conch Venture and Awilco Drilling PLC 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.