Correlation Between PetroChina and Xiandai Investment

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

Diversification Opportunities for PetroChina and Xiandai Investment

0.1
  Correlation Coefficient

Average diversification

The 3 months correlation between PetroChina and Xiandai is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding PetroChina Co Ltd and Xiandai Investment Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xiandai Investment and PetroChina 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 PetroChina Co Ltd are associated (or correlated) with Xiandai Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xiandai Investment has no effect on the direction of PetroChina i.e., PetroChina and Xiandai Investment go up and down completely randomly.

Pair Corralation between PetroChina and Xiandai Investment

Assuming the 90 days trading horizon PetroChina Co Ltd is expected to generate 1.34 times more return on investment than Xiandai Investment. However, PetroChina is 1.34 times more volatile than Xiandai Investment Co. It trades about 0.07 of its potential returns per unit of risk. Xiandai Investment Co is currently generating about 0.03 per unit of risk. If you would invest  486.00  in PetroChina Co Ltd on September 12, 2024 and sell it today you would earn a total of  350.00  from holding PetroChina Co Ltd or generate 72.02% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

PetroChina Co Ltd  vs.  Xiandai Investment Co

 Performance 
       Timeline  
PetroChina 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in PetroChina Co Ltd are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, PetroChina may actually be approaching a critical reversion point that can send shares even higher in January 2025.
Xiandai Investment 

Risk-Adjusted Performance

17 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Xiandai Investment Co are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Xiandai Investment sustained solid returns over the last few months and may actually be approaching a breakup point.

PetroChina and Xiandai Investment Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with PetroChina and Xiandai Investment

The main advantage of trading using opposite PetroChina and Xiandai Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PetroChina position performs unexpectedly, Xiandai Investment 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 Xiandai Investment will offset losses from the drop in Xiandai Investment's long position.
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The idea behind PetroChina Co Ltd and Xiandai Investment Co 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.

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