Correlation Between Transocean and Sinopec Oilfield

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

By analyzing existing cross correlation between Transocean and Sinopec Oilfield Service, you can compare the effects of market volatilities on Transocean and Sinopec Oilfield 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 Sinopec Oilfield. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transocean and Sinopec Oilfield.

Diversification Opportunities for Transocean and Sinopec Oilfield

-0.3

Correlation Coefficient

Transocean  Sinopec Oilfield

Very good diversification

The 3 months correlation between Transocean and Sinopec is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Transocean and Sinopec Oilfield Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sinopec Oilfield Service 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 Sinopec Oilfield. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sinopec Oilfield Service has no effect on the direction of Transocean i.e., Transocean and Sinopec Oilfield go up and down completely randomly.

Pair Corralation between Transocean and Sinopec Oilfield

If you would invest  6.54  in Sinopec Oilfield Service on October 9, 2024 and sell it today you would earn a total of  0.00  from holding Sinopec Oilfield Service or generate 0.0% return on investment over 90 days.

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

Transocean  vs.  Sinopec Oilfield Service

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 latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Sinopec Oilfield Service

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sinopec Oilfield Service are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting technical and fundamental indicators, Sinopec Oilfield may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Transocean and Sinopec Oilfield

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

The idea behind Transocean and Sinopec Oilfield Service 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.