Correlation Between PetroChina and DRLimited
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By analyzing existing cross correlation between PetroChina Co Ltd and DR Limited, you can compare the effects of market volatilities on PetroChina and DRLimited 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 DRLimited. Check out your portfolio center. Please also check ongoing floating volatility patterns of PetroChina and DRLimited.
Diversification Opportunities for PetroChina and DRLimited
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between PetroChina and DRLimited is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding PetroChina Co Ltd and DR Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DR Limited 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 DRLimited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DR Limited has no effect on the direction of PetroChina i.e., PetroChina and DRLimited go up and down completely randomly.
Pair Corralation between PetroChina and DRLimited
Assuming the 90 days trading horizon PetroChina Co Ltd is expected to under-perform the DRLimited. But the stock apears to be less risky and, when comparing its historical volatility, PetroChina Co Ltd is 2.27 times less risky than DRLimited. The stock trades about -0.25 of its potential returns per unit of risk. The DR Limited is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 2,173 in DR Limited on November 7, 2024 and sell it today you would earn a total of 222.00 from holding DR Limited or generate 10.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
PetroChina Co Ltd vs. DR Limited
Performance |
| Timeline |
| PetroChina |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| DR Limited |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Weak
PetroChina and DRLimited Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PetroChina and DRLimited
The main advantage of trading using opposite PetroChina and DRLimited positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PetroChina position performs unexpectedly, DRLimited 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 DRLimited will offset losses from the drop in DRLimited's long position.The idea behind PetroChina Co Ltd and DR Limited 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.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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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