Correlation Between PetroChina and Super-Dragon Engineering

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Can any of the company-specific risk be diversified away by investing in both PetroChina and Super-Dragon Engineering 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 Super-Dragon Engineering 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 Super Dragon Engineering Plastics, you can compare the effects of market volatilities on PetroChina and Super-Dragon Engineering 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 Super-Dragon Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of PetroChina and Super-Dragon Engineering.

Diversification Opportunities for PetroChina and Super-Dragon Engineering

-0.44
  Correlation Coefficient

Very good diversification

The 3 months correlation between PetroChina and Super-Dragon is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding PetroChina Co Ltd and Super Dragon Engineering Plast in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Super-Dragon Engineering 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 Super-Dragon Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Super-Dragon Engineering has no effect on the direction of PetroChina i.e., PetroChina and Super-Dragon Engineering go up and down completely randomly.

Pair Corralation between PetroChina and Super-Dragon Engineering

Assuming the 90 days trading horizon PetroChina Co Ltd is expected to under-perform the Super-Dragon Engineering. But the stock apears to be less risky and, when comparing its historical volatility, PetroChina Co Ltd is 1.56 times less risky than Super-Dragon Engineering. The stock trades about -0.17 of its potential returns per unit of risk. The Super Dragon Engineering Plastics is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  3,360  in Super Dragon Engineering Plastics on November 3, 2024 and sell it today you would earn a total of  101.00  from holding Super Dragon Engineering Plastics or generate 3.01% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

PetroChina Co Ltd  vs.  Super Dragon Engineering Plast

 Performance 
       Timeline  
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.
Super-Dragon Engineering 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Super Dragon Engineering Plastics are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Super-Dragon Engineering is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

PetroChina and Super-Dragon Engineering Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with PetroChina and Super-Dragon Engineering

The main advantage of trading using opposite PetroChina and Super-Dragon Engineering positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PetroChina position performs unexpectedly, Super-Dragon Engineering 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 Super-Dragon Engineering will offset losses from the drop in Super-Dragon Engineering's long position.
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The idea behind PetroChina Co Ltd and Super Dragon Engineering Plastics 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.

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