Correlation Between Tri Pointe and CNOOC

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

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

Diversification Opportunities for Tri Pointe and CNOOC

0.1

Correlation Coefficient

Tri Pointe  CNOOC

Average diversification

The 3 months correlation between Tri and CNOOC is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Tri Pointe Homes and CNOOC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CNOOC and Tri Pointe 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 Tri Pointe Homes 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 has no effect on the direction of Tri Pointe i.e., Tri Pointe and CNOOC go up and down completely randomly.

Pair Corralation between Tri Pointe and CNOOC

Assuming the 90 days horizon Tri Pointe Homes is expected to under-perform the CNOOC. In addition to that, Tri Pointe is 3.61 times more volatile than CNOOC. It trades about -0.16 of its total potential returns per unit of risk. CNOOC is currently generating about -0.04 per unit of volatility. If you would invest  220.00  in CNOOC on September 19, 2024 and sell it today you would lose (2.00) from holding CNOOC or give up 0.91% of portfolio value over 90 days.

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

Tri Pointe Homes  vs.  CNOOC

Tri Pointe Homes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tri Pointe Homes has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

CNOOC

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Tri Pointe and CNOOC

The main advantage of trading using opposite Tri Pointe and CNOOC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tri Pointe 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 Tri Pointe Homes and CNOOC 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.