Correlation Between Computer Modelling and China Oilfield

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

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

Diversification Opportunities for Computer Modelling and China Oilfield

0.32

Correlation Coefficient

Computer Modelling  China Oilfield

Weak diversification

The 3 months correlation between Computer and China is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Computer Modelling Group and China Oilfield Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Oilfield Services and Computer Modelling 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 Computer Modelling Group are associated (or correlated) with China Oilfield. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Oilfield Services has no effect on the direction of Computer Modelling i.e., Computer Modelling and China Oilfield go up and down completely randomly.

Pair Corralation between Computer Modelling and China Oilfield

Assuming the 90 days horizon Computer Modelling Group is expected to under-perform the China Oilfield. But the pink sheet apears to be less risky and, when comparing its historical volatility, Computer Modelling Group is 4.42 times less risky than China Oilfield. The pink sheet trades about -0.05 of its potential returns per unit of risk. The China Oilfield Services is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  84.00  in China Oilfield Services on January 17, 2024 and sell it today you would earn a total of  16.00  from holding China Oilfield Services or generate 19.05% return on investment over 90 days.

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

Computer Modelling Group  vs.  China Oilfield Services

Computer Modelling

Risk-Adjusted Performance

0 of 100

Very Weak

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

China Oilfield Services

Risk-Adjusted Performance

0 of 100

Very Weak

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 essential indicators, China Oilfield is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Computer Modelling and China Oilfield

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

The idea behind Computer Modelling Group and China Oilfield Services 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.