Correlation Between Transocean and China Finance

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

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

Diversification Opportunities for Transocean and China Finance

0.0

Correlation Coefficient

Transocean  China Finance

Pay attention - limited upside

The 3 months correlation between Transocean and China is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Transocean and China Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Finance and Transocean 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 Transocean are associated (or correlated) with China Finance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Finance has no effect on the direction of Transocean i.e., Transocean and China Finance go up and down completely randomly.

Pair Corralation between Transocean and China Finance

If you would invest  0.00  in China Finance on October 10, 2024 and sell it today you would earn a total of  0.00  from holding China Finance or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Transocean  vs.  China Finance

Transocean

Risk-Adjusted Performance

0 of 100

Very Weak

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

China Finance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Finance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, China Finance is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Transocean and China Finance

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

The idea behind Transocean and China Finance 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.