Correlation Between China Oilfield and Halliburton

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

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

Diversification Opportunities for China Oilfield and Halliburton

-0.26

Correlation Coefficient

China Oilfield  Halliburton

Very good diversification

The 3 months correlation between China and Halliburton is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding China Oilfield Services and Halliburton in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Halliburton and China Oilfield 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 Oilfield Services are associated (or correlated) with Halliburton. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Halliburton has no effect on the direction of China Oilfield i.e., China Oilfield and Halliburton go up and down completely randomly.

Pair Corralation between China Oilfield and Halliburton

Assuming the 90 days horizon China Oilfield Services is expected to generate 1.52 times more return on investment than Halliburton. However, China Oilfield is 1.52 times more volatile than Halliburton. It trades about 0.03 of its potential returns per unit of risk. Halliburton is currently generating about -0.02 per unit of risk. If you would invest  64.00  in China Oilfield Services on October 13, 2024 and sell it today you would earn a total of  22.00  from holding China Oilfield Services or generate 34.38% return on investment over 90 days.

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

China Oilfield Services  vs.  Halliburton

China Oilfield Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Oilfield Services has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, China Oilfield is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Halliburton

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Halliburton has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Halliburton is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with China Oilfield and Halliburton

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

The idea behind China Oilfield Services and Halliburton 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.