Correlation Between Bus Online and CNOOC

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

By analyzing existing cross correlation between Bus Online Co and CNOOC Limited, you can compare the effects of market volatilities on Bus Online 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 Bus Online with a short position of CNOOC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bus Online and CNOOC.

Diversification Opportunities for Bus Online and CNOOC

0.17

Correlation Coefficient

Bus Online  CNOOC

Average diversification

The 3 months correlation between Bus and CNOOC is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Bus Online Co and CNOOC Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CNOOC Limited and Bus Online 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 Bus Online Co 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 Limited has no effect on the direction of Bus Online i.e., Bus Online and CNOOC go up and down completely randomly.

Pair Corralation between Bus Online and CNOOC

Assuming the 90 days trading horizon Bus Online Co is expected to generate 1.33 times more return on investment than CNOOC. However, Bus Online is 1.33 times more volatile than CNOOC Limited. It trades about 0.2 of its potential returns per unit of risk. CNOOC Limited is currently generating about 0.06 per unit of risk. If you would invest  399.00  in Bus Online Co on September 13, 2024 and sell it today you would earn a total of  146.00  from holding Bus Online Co or generate 36.59% return on investment over 90 days.

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

Bus Online Co  vs.  CNOOC Limited

Bus Online

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bus Online Co are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Bus Online sustained solid returns over the last few months and may actually be approaching a breakup point.

CNOOC Limited

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CNOOC Limited are ranked lower than 4 (%) 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.

Pair Trading with Bus Online and CNOOC

The main advantage of trading using opposite Bus Online and CNOOC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bus Online 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.

The idea behind Bus Online Co and CNOOC Limited 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.