Correlation Between Eidesvik Offshore and China Resources

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

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

Diversification Opportunities for Eidesvik Offshore and China Resources

0.56

Correlation Coefficient

Eidesvik Offshore  China Resources

Very weak diversification

The 3 months correlation between Eidesvik and China is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Eidesvik Offshore ASA and China Resources Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Resources Power and Eidesvik Offshore 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 Eidesvik Offshore ASA are associated (or correlated) with China Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Resources Power has no effect on the direction of Eidesvik Offshore i.e., Eidesvik Offshore and China Resources go up and down completely randomly.

Pair Corralation between Eidesvik Offshore and China Resources

Assuming the 90 days trading horizon Eidesvik Offshore is expected to generate 3.2 times less return on investment than China Resources. But when comparing it to its historical volatility, Eidesvik Offshore ASA is 1.11 times less risky than China Resources. It trades about 0.03 of its potential returns per unit of risk. China Resources Power is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  115.00  in China Resources Power on October 6, 2024 and sell it today you would earn a total of  103.00  from holding China Resources Power or generate 89.57% return on investment over 90 days.

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

Eidesvik Offshore ASA  vs.  China Resources Power

Eidesvik Offshore ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eidesvik Offshore ASA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

China Resources Power

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Resources Power has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Eidesvik Offshore and China Resources

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

The idea behind Eidesvik Offshore ASA and China Resources Power 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 CEOs Directory module to screen CEOs from public companies around the world.