Correlation Between NBTM New and PetroChina

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Can any of the company-specific risk be diversified away by investing in both NBTM New and PetroChina 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 NBTM New and PetroChina into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NBTM New Materials and PetroChina Co Ltd, you can compare the effects of market volatilities on NBTM New and PetroChina 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 NBTM New with a short position of PetroChina. Check out your portfolio center. Please also check ongoing floating volatility patterns of NBTM New and PetroChina.

Diversification Opportunities for NBTM New and PetroChina

-0.32
  Correlation Coefficient

Very good diversification

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

Pair Corralation between NBTM New and PetroChina

Assuming the 90 days trading horizon NBTM New Materials is expected to generate 1.72 times more return on investment than PetroChina. However, NBTM New is 1.72 times more volatile than PetroChina Co Ltd. It trades about 0.09 of its potential returns per unit of risk. PetroChina Co Ltd is currently generating about -0.18 per unit of risk. If you would invest  1,649  in NBTM New Materials on October 25, 2024 and sell it today you would earn a total of  73.00  from holding NBTM New Materials or generate 4.43% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

NBTM New Materials  vs.  PetroChina Co Ltd

 Performance 
       Timeline  
NBTM New Materials 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days NBTM New Materials has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, NBTM New is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
PetroChina 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days PetroChina Co Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, PetroChina is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

NBTM New and PetroChina Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with NBTM New and PetroChina

The main advantage of trading using opposite NBTM New and PetroChina positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NBTM New position performs unexpectedly, PetroChina 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 PetroChina will offset losses from the drop in PetroChina's long position.
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The idea behind NBTM New Materials and PetroChina Co 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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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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.

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