Correlation Between China Oilfield and Computer Modelling

Can any of the company-specific risk be diversified away by investing in both China Oilfield and Computer Modelling 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 Computer Modelling 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 Computer Modelling Group, you can compare the effects of market volatilities on China Oilfield and Computer Modelling 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 Computer Modelling. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Oilfield and Computer Modelling.

Diversification Opportunities for China Oilfield and Computer Modelling

0.25

Correlation Coefficient

China Oilfield  Computer Modelling

Modest diversification

The 3 months correlation between China and Computer is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding China Oilfield Services and Computer Modelling Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Computer Modelling 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 Computer Modelling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Computer Modelling has no effect on the direction of China Oilfield i.e., China Oilfield and Computer Modelling go up and down completely randomly.

Pair Corralation between China Oilfield and Computer Modelling

Assuming the 90 days horizon China Oilfield is expected to generate 46.74 times less return on investment than Computer Modelling. But when comparing it to its historical volatility, China Oilfield Services is 1.12 times less risky than Computer Modelling. It trades about 0.0 of its potential returns per unit of risk. Computer Modelling Group is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  528.00  in Computer Modelling Group on January 25, 2024 and sell it today you would earn a total of  231.00  from holding Computer Modelling Group or generate 43.75% return on investment over 90 days.

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

China Oilfield Services  vs.  Computer Modelling Group

China Oilfield Services

Risk-Adjusted Performance

5 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in China Oilfield Services are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent essential indicators, China Oilfield reported solid returns over the last few months and may actually be approaching a breakup point.

Computer Modelling

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Computer Modelling Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Computer Modelling may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with China Oilfield and Computer Modelling

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

The idea behind China Oilfield Services and Computer Modelling Group 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.