Correlation Between PetroChina and Sichuan Teway

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

Diversification Opportunities for PetroChina and Sichuan Teway

-0.16
  Correlation Coefficient

Good diversification

The 3 months correlation between PetroChina and Sichuan is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding PetroChina Co Ltd and Sichuan Teway Food in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sichuan Teway Food 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 Sichuan Teway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sichuan Teway Food has no effect on the direction of PetroChina i.e., PetroChina and Sichuan Teway go up and down completely randomly.

Pair Corralation between PetroChina and Sichuan Teway

Assuming the 90 days trading horizon PetroChina is expected to generate 9.53 times less return on investment than Sichuan Teway. But when comparing it to its historical volatility, PetroChina Co Ltd is 1.23 times less risky than Sichuan Teway. It trades about 0.01 of its potential returns per unit of risk. Sichuan Teway Food is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,110  in Sichuan Teway Food on August 29, 2024 and sell it today you would earn a total of  240.00  from holding Sichuan Teway Food or generate 21.62% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

PetroChina Co Ltd  vs.  Sichuan Teway Food

 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.
Sichuan Teway Food 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Sichuan Teway Food are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sichuan Teway sustained solid returns over the last few months and may actually be approaching a breakup point.

PetroChina and Sichuan Teway Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with PetroChina and Sichuan Teway

The main advantage of trading using opposite PetroChina and Sichuan Teway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PetroChina position performs unexpectedly, Sichuan Teway 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 Sichuan Teway will offset losses from the drop in Sichuan Teway's long position.
The idea behind PetroChina Co Ltd and Sichuan Teway Food 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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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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.

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