Correlation Between CNOOC and Jiangsu Changfa

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

Diversification Opportunities for CNOOC and Jiangsu Changfa

0.06
  Correlation Coefficient

Significant diversification

The 3 months correlation between CNOOC and Jiangsu is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding CNOOC Limited and Jiangsu Changfa Refrigeration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangsu Changfa Refr 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 Jiangsu Changfa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangsu Changfa Refr has no effect on the direction of CNOOC i.e., CNOOC and Jiangsu Changfa go up and down completely randomly.

Pair Corralation between CNOOC and Jiangsu Changfa

Assuming the 90 days trading horizon CNOOC Limited is expected to generate 0.65 times more return on investment than Jiangsu Changfa. However, CNOOC Limited is 1.53 times less risky than Jiangsu Changfa. It trades about 0.08 of its potential returns per unit of risk. Jiangsu Changfa Refrigeration is currently generating about 0.01 per unit of risk. If you would invest  1,656  in CNOOC Limited on September 9, 2024 and sell it today you would earn a total of  1,044  from holding CNOOC Limited or generate 63.04% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

CNOOC Limited  vs.  Jiangsu Changfa Refrigeration

 Performance 
       Timeline  
CNOOC Limited 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in CNOOC Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, CNOOC may actually be approaching a critical reversion point that can send shares even higher in January 2025.
Jiangsu Changfa Refr 

Risk-Adjusted Performance

16 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Jiangsu Changfa Refrigeration are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jiangsu Changfa sustained solid returns over the last few months and may actually be approaching a breakup point.

CNOOC and Jiangsu Changfa Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with CNOOC and Jiangsu Changfa

The main advantage of trading using opposite CNOOC and Jiangsu Changfa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CNOOC position performs unexpectedly, Jiangsu Changfa 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 Jiangsu Changfa will offset losses from the drop in Jiangsu Changfa's long position.
The idea behind CNOOC Limited and Jiangsu Changfa Refrigeration 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.

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