Correlation Between Fujian Longzhou and CNOOC

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

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

Diversification Opportunities for Fujian Longzhou and CNOOC

-0.13

Correlation Coefficient

Fujian Longzhou  CNOOC

Good diversification

The 3 months correlation between Fujian and CNOOC is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Fujian Longzhou Transportation and CNOOC Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CNOOC Limited and Fujian Longzhou 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 Fujian Longzhou Transportation 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 Fujian Longzhou i.e., Fujian Longzhou and CNOOC go up and down completely randomly.

Pair Corralation between Fujian Longzhou and CNOOC

Assuming the 90 days trading horizon Fujian Longzhou Transportation is expected to generate 1.53 times more return on investment than CNOOC. However, Fujian Longzhou is 1.53 times more volatile than CNOOC Limited. It trades about 0.23 of its potential returns per unit of risk. CNOOC Limited is currently generating about -0.04 per unit of risk. If you would invest  344.00  in Fujian Longzhou Transportation on September 1, 2024 and sell it today you would earn a total of  188.00  from holding Fujian Longzhou Transportation or generate 54.65% return on investment over 90 days.

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

Fujian Longzhou Transportation  vs.  CNOOC Limited

Fujian Longzhou Tran

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fujian Longzhou Transportation are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Fujian Longzhou sustained solid returns over the last few months and may actually be approaching a breakup point.

CNOOC Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CNOOC Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Fujian Longzhou and CNOOC

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

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.