Correlation Between China BlueChemical and WT OFFSHORE

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

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

Diversification Opportunities for China BlueChemical and WT OFFSHORE

0.11

Correlation Coefficient

China BlueChemical  WT OFFSHORE

Average diversification

The 3 months correlation between China and UWV is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding China BlueChemical and WT OFFSHORE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WT OFFSHORE and China BlueChemical 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 BlueChemical are associated (or correlated) with WT OFFSHORE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WT OFFSHORE has no effect on the direction of China BlueChemical i.e., China BlueChemical and WT OFFSHORE go up and down completely randomly.

Pair Corralation between China BlueChemical and WT OFFSHORE

Assuming the 90 days horizon China BlueChemical is expected to generate 1.18 times more return on investment than WT OFFSHORE. However, China BlueChemical is 1.18 times more volatile than WT OFFSHORE. It trades about 0.03 of its potential returns per unit of risk. WT OFFSHORE is currently generating about -0.06 per unit of risk. If you would invest  22.00  in China BlueChemical on September 18, 2024 and sell it today you would earn a total of  3.00  from holding China BlueChemical or generate 13.64% return on investment over 90 days.

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

China BlueChemical  vs.  WT OFFSHORE

China BlueChemical

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China BlueChemical are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, China BlueChemical reported solid returns over the last few months and may actually be approaching a breakup point.

WT OFFSHORE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WT OFFSHORE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with China BlueChemical and WT OFFSHORE

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

The idea behind China BlueChemical and WT OFFSHORE 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.