Correlation Between China Oilfield and BW OFFSHORE

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

By analyzing existing cross correlation between China Oilfield Services and BW OFFSHORE LTD, you can compare the effects of market volatilities on China Oilfield and BW OFFSHORE 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 China Oilfield with a short position of BW OFFSHORE. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Oilfield and BW OFFSHORE.

Diversification Opportunities for China Oilfield and BW OFFSHORE

0.82

Correlation Coefficient

China Oilfield  BW OFFSHORE

Very poor diversification

The 3 months correlation between China and XY81 is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding China Oilfield Services and BW OFFSHORE LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BW OFFSHORE LTD and China Oilfield 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 China Oilfield Services are associated (or correlated) with BW OFFSHORE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BW OFFSHORE LTD has no effect on the direction of China Oilfield i.e., China Oilfield and BW OFFSHORE go up and down completely randomly.

Pair Corralation between China Oilfield and BW OFFSHORE

Assuming the 90 days horizon China Oilfield Services is expected to under-perform the BW OFFSHORE. But the stock apears to be less risky and, when comparing its historical volatility, China Oilfield Services is 1.93 times less risky than BW OFFSHORE. The stock trades about -0.05 of its potential returns per unit of risk. The BW OFFSHORE LTD is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  231.00  in BW OFFSHORE LTD on September 28, 2024 and sell it today you would lose (1.00) from holding BW OFFSHORE LTD or give up 0.43% of portfolio value over 90 days.

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

China Oilfield Services  vs.  BW OFFSHORE LTD

China Oilfield Services

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days China Oilfield Services has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, China Oilfield is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

BW OFFSHORE LTD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BW OFFSHORE LTD has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, BW OFFSHORE is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with China Oilfield and BW OFFSHORE

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

The idea behind China Oilfield Services and BW OFFSHORE LTD 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.