Correlation Between CHINA HUARONG and EOG Resources
Can any of the company-specific risk be diversified away by investing in both CHINA HUARONG and EOG Resources 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 CHINA HUARONG and EOG Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CHINA HUARONG ENERHD 50 and EOG Resources, you can compare the effects of market volatilities on CHINA HUARONG and EOG Resources 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 CHINA HUARONG with a short position of EOG Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHINA HUARONG and EOG Resources.
Diversification Opportunities for CHINA HUARONG and EOG Resources
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between CHINA and EOG is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding CHINA HUARONG ENERHD 50 and EOG Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EOG Resources and CHINA HUARONG 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 CHINA HUARONG ENERHD 50 are associated (or correlated) with EOG Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EOG Resources has no effect on the direction of CHINA HUARONG i.e., CHINA HUARONG and EOG Resources go up and down completely randomly.
Pair Corralation between CHINA HUARONG and EOG Resources
Assuming the 90 days trading horizon CHINA HUARONG ENERHD 50 is expected to generate 26.98 times more return on investment than EOG Resources. However, CHINA HUARONG is 26.98 times more volatile than EOG Resources. It trades about 0.13 of its potential returns per unit of risk. EOG Resources is currently generating about 0.04 per unit of risk. If you would invest 0.35 in CHINA HUARONG ENERHD 50 on August 31, 2024 and sell it today you would lose (0.20) from holding CHINA HUARONG ENERHD 50 or give up 57.14% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CHINA HUARONG ENERHD 50 vs. EOG Resources
Performance |
| Timeline |
| CHINA HUARONG ENERHD |
| EOG Resources |
CHINA HUARONG and EOG Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CHINA HUARONG and EOG Resources
The main advantage of trading using opposite CHINA HUARONG and EOG Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CHINA HUARONG position performs unexpectedly, EOG Resources 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 EOG Resources will offset losses from the drop in EOG Resources' long position.| CHINA HUARONG vs. AEGEAN AIRLINES | CHINA HUARONG vs. JAPAN AIRLINES | CHINA HUARONG vs. American Eagle Outfitters | CHINA HUARONG vs. SINGAPORE AIRLINES |
| EOG Resources vs. China Communications Services | EOG Resources vs. Gamma Communications plc | EOG Resources vs. Corporate Travel Management | EOG Resources vs. Iridium Communications |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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