Correlation Between CNOOC and Xiandai Investment

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Can any of the company-specific risk be diversified away by investing in both CNOOC and Xiandai Investment 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 CNOOC and Xiandai Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CNOOC Limited and Xiandai Investment Co, you can compare the effects of market volatilities on CNOOC and Xiandai Investment 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 CNOOC with a short position of Xiandai Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of CNOOC and Xiandai Investment.

Diversification Opportunities for CNOOC and Xiandai Investment

-0.26
  Correlation Coefficient

Very good diversification

The 3 months correlation between CNOOC and Xiandai is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding CNOOC Limited and Xiandai Investment Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xiandai Investment and CNOOC 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 CNOOC Limited are associated (or correlated) with Xiandai Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xiandai Investment has no effect on the direction of CNOOC i.e., CNOOC and Xiandai Investment go up and down completely randomly.

Pair Corralation between CNOOC and Xiandai Investment

Assuming the 90 days trading horizon CNOOC Limited is expected to under-perform the Xiandai Investment. In addition to that, CNOOC is 1.32 times more volatile than Xiandai Investment Co. It trades about -0.16 of its total potential returns per unit of risk. Xiandai Investment Co is currently generating about 0.03 per unit of volatility. If you would invest  420.00  in Xiandai Investment Co on November 5, 2024 and sell it today you would earn a total of  2.00  from holding Xiandai Investment Co or generate 0.48% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

CNOOC Limited  vs.  Xiandai Investment Co

 Performance 
       Timeline  
CNOOC Limited 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in CNOOC Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, CNOOC is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Xiandai Investment 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Xiandai Investment Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Xiandai Investment is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

CNOOC and Xiandai Investment Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with CNOOC and Xiandai Investment

The main advantage of trading using opposite CNOOC and Xiandai Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CNOOC position performs unexpectedly, Xiandai Investment 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 Xiandai Investment will offset losses from the drop in Xiandai Investment's long position.
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The idea behind CNOOC Limited and Xiandai Investment Co 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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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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..

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