Correlation Between CNOOC and Zhongrun Resources

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

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

Diversification Opportunities for CNOOC and Zhongrun Resources

-0.36

Correlation Coefficient

CNOOC  Zhongrun Resources

Very good diversification

The 3 months correlation between CNOOC and Zhongrun is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding CNOOC Limited and Zhongrun Resources Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhongrun Resources 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 Zhongrun Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhongrun Resources has no effect on the direction of CNOOC i.e., CNOOC and Zhongrun Resources go up and down completely randomly.

Pair Corralation between CNOOC and Zhongrun Resources

Assuming the 90 days trading horizon CNOOC is expected to generate 21.68 times less return on investment than Zhongrun Resources. But when comparing it to its historical volatility, CNOOC Limited is 1.79 times less risky than Zhongrun Resources. It trades about 0.04 of its potential returns per unit of risk. Zhongrun Resources Investment is currently generating about 0.45 of returns per unit of risk over similar time horizon. If you would invest  133.00  in Zhongrun Resources Investment on September 23, 2024 and sell it today you would earn a total of  226.00  from holding Zhongrun Resources Investment or generate 169.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

CNOOC Limited  vs.  Zhongrun Resources Investment

CNOOC Limited

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CNOOC Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, CNOOC is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Zhongrun Resources

Risk-Adjusted Performance

35 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Zhongrun Resources Investment are ranked lower than 35 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhongrun Resources sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CNOOC and Zhongrun Resources

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

The idea behind CNOOC Limited and Zhongrun Resources Investment 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.