Correlation Between CNOOC and Citic Guoan

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

By analyzing existing cross correlation between CNOOC Limited and Citic Guoan Wine, you can compare the effects of market volatilities on CNOOC and Citic Guoan 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 Citic Guoan. Check out your portfolio center. Please also check ongoing floating volatility patterns of CNOOC and Citic Guoan.

Diversification Opportunities for CNOOC and Citic Guoan

-0.22

Correlation Coefficient

CNOOC  Citic Guoan

Very good diversification

The 3 months correlation between CNOOC and Citic is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding CNOOC Limited and Citic Guoan Wine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citic Guoan Wine 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 Citic Guoan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citic Guoan Wine has no effect on the direction of CNOOC i.e., CNOOC and Citic Guoan go up and down completely randomly.

Pair Corralation between CNOOC and Citic Guoan

Assuming the 90 days trading horizon CNOOC Limited is expected to generate 0.78 times more return on investment than Citic Guoan. However, CNOOC Limited is 1.28 times less risky than Citic Guoan. It trades about 0.09 of its potential returns per unit of risk. Citic Guoan Wine is currently generating about -0.01 per unit of risk. If you would invest  1,379  in CNOOC Limited on September 26, 2024 and sell it today you would earn a total of  1,496  from holding CNOOC Limited or generate 108.48% return on investment over 90 days.

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

CNOOC Limited  vs.  Citic Guoan Wine

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.

Citic Guoan Wine

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Citic Guoan Wine are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Citic Guoan may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with CNOOC and Citic Guoan

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

The idea behind CNOOC Limited and Citic Guoan Wine 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.