Correlation Between CSSC Offshore and Fujian Longzhou

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

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

Diversification Opportunities for CSSC Offshore and Fujian Longzhou

0.01

Correlation Coefficient

CSSC Offshore  Fujian Longzhou

Significant diversification

The 3 months correlation between CSSC and Fujian is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding CSSC Offshore Marine and Fujian Longzhou Transportation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fujian Longzhou Tran and CSSC Offshore 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 CSSC Offshore Marine are associated (or correlated) with Fujian Longzhou. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fujian Longzhou Tran has no effect on the direction of CSSC Offshore i.e., CSSC Offshore and Fujian Longzhou go up and down completely randomly.

Pair Corralation between CSSC Offshore and Fujian Longzhou

Assuming the 90 days trading horizon CSSC Offshore Marine is expected to under-perform the Fujian Longzhou. But the stock apears to be less risky and, when comparing its historical volatility, CSSC Offshore Marine is 3.54 times less risky than Fujian Longzhou. The stock trades about -0.1 of its potential returns per unit of risk. The Fujian Longzhou Transportation is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  443.00  in Fujian Longzhou Transportation on September 19, 2024 and sell it today you would earn a total of  75.00  from holding Fujian Longzhou Transportation or generate 16.93% return on investment over 90 days.

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

CSSC Offshore Marine  vs.  Fujian Longzhou Transportation

CSSC Offshore Marine

Risk-Adjusted Performance

0 of 100

Very Weak

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

Fujian Longzhou Tran

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fujian Longzhou Transportation are ranked lower than 14 (%) 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.

Pair Trading with CSSC Offshore and Fujian Longzhou

The main advantage of trading using opposite CSSC Offshore and Fujian Longzhou positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CSSC Offshore position performs unexpectedly, Fujian Longzhou 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 Fujian Longzhou will offset losses from the drop in Fujian Longzhou's long position.

The idea behind CSSC Offshore Marine and Fujian Longzhou Transportation 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.