Correlation Between Alibaba Group and CNOOC
Can any of the company-specific risk be diversified away by investing in both Alibaba Group and CNOOC 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 Alibaba Group and CNOOC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alibaba Group Holding and CNOOC, you can compare the effects of market volatilities on Alibaba Group and CNOOC 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 Alibaba Group with a short position of CNOOC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alibaba Group and CNOOC.
Diversification Opportunities for Alibaba Group and CNOOC
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Alibaba and CNOOC is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Alibaba Group Holding and CNOOC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CNOOC and Alibaba Group 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 Alibaba Group Holding are associated (or correlated) with CNOOC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CNOOC has no effect on the direction of Alibaba Group i.e., Alibaba Group and CNOOC go up and down completely randomly.
Pair Corralation between Alibaba Group and CNOOC
Assuming the 90 days horizon Alibaba Group is expected to generate 430.4 times less return on investment than CNOOC. But when comparing it to its historical volatility, Alibaba Group Holding is 2.24 times less risky than CNOOC. It trades about 0.0 of its potential returns per unit of risk. CNOOC is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 18.00 in CNOOC on September 3, 2024 and sell it today you would earn a total of 200.00 from holding CNOOC or generate 1111.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alibaba Group Holding vs. CNOOC
Performance |
| Timeline |
| Alibaba Group Holding |
| CNOOC |
Alibaba Group and CNOOC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alibaba Group and CNOOC
The main advantage of trading using opposite Alibaba Group and CNOOC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alibaba Group position performs unexpectedly, CNOOC 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 CNOOC will offset losses from the drop in CNOOC's long position.| Alibaba Group vs. Apple Inc | Alibaba Group vs. Apple Inc | Alibaba Group vs. Apple Inc | Alibaba Group vs. Apple Inc |
| CNOOC vs. SERI INDUSTRIAL EO | CNOOC vs. Lion One Metals | CNOOC vs. MCEWEN MINING INC | CNOOC vs. Spirent Communications plc |
Check out your portfolio center.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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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