Correlation Between PetroChina and Qinghaihuading Industrial

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

Diversification Opportunities for PetroChina and Qinghaihuading Industrial

-0.01
  Correlation Coefficient

Good diversification

The 3 months correlation between PetroChina and Qinghaihuading is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding PetroChina Co Ltd and Qinghaihuading Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qinghaihuading Industrial 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 Qinghaihuading Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qinghaihuading Industrial has no effect on the direction of PetroChina i.e., PetroChina and Qinghaihuading Industrial go up and down completely randomly.

Pair Corralation between PetroChina and Qinghaihuading Industrial

Assuming the 90 days trading horizon PetroChina Co Ltd is expected to under-perform the Qinghaihuading Industrial. But the stock apears to be less risky and, when comparing its historical volatility, PetroChina Co Ltd is 3.38 times less risky than Qinghaihuading Industrial. The stock trades about -0.47 of its potential returns per unit of risk. The Qinghaihuading Industrial Co is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  284.00  in Qinghaihuading Industrial Co on November 28, 2024 and sell it today you would earn a total of  32.00  from holding Qinghaihuading Industrial Co or generate 11.27% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

PetroChina Co Ltd  vs.  Qinghaihuading Industrial Co

 Performance 
       Timeline  
PetroChina 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
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.
Qinghaihuading Industrial 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Qinghaihuading Industrial Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

PetroChina and Qinghaihuading Industrial Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with PetroChina and Qinghaihuading Industrial

The main advantage of trading using opposite PetroChina and Qinghaihuading Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PetroChina position performs unexpectedly, Qinghaihuading Industrial 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 Qinghaihuading Industrial will offset losses from the drop in Qinghaihuading Industrial's long position.
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The idea behind PetroChina Co Ltd and Qinghaihuading Industrial 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..

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