Correlation Between CNOOC and PetroChina

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

Diversification Opportunities for CNOOC and PetroChina

0.97
  Correlation Coefficient

Almost no diversification

The 3 months correlation between CNOOC and PetroChina is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding CNOOC Limited and PetroChina Co Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PetroChina and CNOOC 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 CNOOC Limited 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 CNOOC i.e., CNOOC and PetroChina go up and down completely randomly.

Pair Corralation between CNOOC and PetroChina

Assuming the 90 days trading horizon CNOOC Limited is expected to generate 0.92 times more return on investment than PetroChina. However, CNOOC Limited is 1.09 times less risky than PetroChina. It trades about -0.16 of its potential returns per unit of risk. PetroChina Co Ltd is currently generating about -0.25 per unit of risk. If you would invest  2,865  in CNOOC Limited on November 5, 2024 and sell it today you would lose (114.00) from holding CNOOC Limited or give up 3.98% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

CNOOC Limited  vs.  PetroChina Co Ltd

 Performance 
       Timeline  
CNOOC Limited 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in CNOOC Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, CNOOC 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

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in PetroChina Co Ltd are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

CNOOC and PetroChina Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with CNOOC and PetroChina

The main advantage of trading using opposite CNOOC and PetroChina positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CNOOC 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.
The idea behind CNOOC Limited 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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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.

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