Correlation Between PetroChina and Chinese Universe

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

Diversification Opportunities for PetroChina and Chinese Universe

0.52
  Correlation Coefficient

Very weak diversification

The 3 months correlation between PetroChina and Chinese is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding PetroChina Co Ltd and Chinese Universe Publishing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chinese Universe Pub 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 Chinese Universe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chinese Universe Pub has no effect on the direction of PetroChina i.e., PetroChina and Chinese Universe go up and down completely randomly.

Pair Corralation between PetroChina and Chinese Universe

Assuming the 90 days trading horizon PetroChina Co Ltd is expected to generate 0.69 times more return on investment than Chinese Universe. However, PetroChina Co Ltd is 1.45 times less risky than Chinese Universe. It trades about 0.07 of its potential returns per unit of risk. Chinese Universe Publishing is currently generating about 0.04 per unit of risk. If you would invest  484.00  in PetroChina Co Ltd on September 30, 2024 and sell it today you would earn a total of  408.00  from holding PetroChina Co Ltd or generate 84.3% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

PetroChina Co Ltd  vs.  Chinese Universe Publishing

 Performance 
       Timeline  
PetroChina 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
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.
Chinese Universe Pub 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Chinese Universe Publishing 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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

PetroChina and Chinese Universe Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with PetroChina and Chinese Universe

The main advantage of trading using opposite PetroChina and Chinese Universe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PetroChina position performs unexpectedly, Chinese Universe 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 Chinese Universe will offset losses from the drop in Chinese Universe's long position.
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The idea behind PetroChina Co Ltd and Chinese Universe Publishing 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.

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