Correlation Between PetroChina and Industrial

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

Diversification Opportunities for PetroChina and Industrial

0.68
  Correlation Coefficient

Poor diversification

The 3 months correlation between PetroChina and Industrial is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding PetroChina Co Ltd and Industrial and Commercial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrial and Commercial 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 Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrial and Commercial has no effect on the direction of PetroChina i.e., PetroChina and Industrial go up and down completely randomly.

Pair Corralation between PetroChina and Industrial

Assuming the 90 days trading horizon PetroChina Co Ltd is expected to under-perform the Industrial. In addition to that, PetroChina is 1.23 times more volatile than Industrial and Commercial. It trades about -0.18 of its total potential returns per unit of risk. Industrial and Commercial is currently generating about 0.0 per unit of volatility. If you would invest  614.00  in Industrial and Commercial on August 24, 2024 and sell it today you would lose (1.00) from holding Industrial and Commercial or give up 0.16% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

PetroChina Co Ltd  vs.  Industrial and Commercial

 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 latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.
Industrial and Commercial 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Industrial and Commercial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Industrial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

PetroChina and Industrial Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with PetroChina and Industrial

The main advantage of trading using opposite PetroChina and Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PetroChina position performs unexpectedly, 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 Industrial will offset losses from the drop in Industrial's long position.
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The idea behind PetroChina Co Ltd and Industrial and Commercial 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.

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