Correlation Between Woodside Energy and CNOOC

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

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

Diversification Opportunities for Woodside Energy and CNOOC

0.43

Correlation Coefficient

Woodside Energy  CNOOC

Very weak diversification

The 3 months correlation between Woodside and CNOOC is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Woodside Energy Group and CNOOC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CNOOC and Woodside Energy 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 Woodside Energy Group 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 Woodside Energy i.e., Woodside Energy and CNOOC go up and down completely randomly.

Pair Corralation between Woodside Energy and CNOOC

If you would invest  1,452  in Woodside Energy Group on September 5, 2024 and sell it today you would earn a total of  78.00  from holding Woodside Energy Group or generate 5.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.65%
Values	Daily Returns

Woodside Energy Group  vs.  CNOOC

Woodside Energy Group

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Woodside Energy Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Woodside Energy is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

CNOOC

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CNOOC are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CNOOC reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Woodside Energy and CNOOC

The main advantage of trading using opposite Woodside Energy and CNOOC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Woodside Energy 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 Woodside Energy Group 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.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.