Correlation Between PetroChina and Shanghai CEO

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

Diversification Opportunities for PetroChina and Shanghai CEO

-0.73
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between PetroChina and Shanghai is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding PetroChina Co Ltd and Shanghai CEO Environmental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai CEO Environ 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 Shanghai CEO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai CEO Environ has no effect on the direction of PetroChina i.e., PetroChina and Shanghai CEO go up and down completely randomly.

Pair Corralation between PetroChina and Shanghai CEO

Assuming the 90 days trading horizon PetroChina Co Ltd is expected to under-perform the Shanghai CEO. But the stock apears to be less risky and, when comparing its historical volatility, PetroChina Co Ltd is 1.41 times less risky than Shanghai CEO. The stock trades about -0.25 of its potential returns per unit of risk. The Shanghai CEO Environmental is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  812.00  in Shanghai CEO Environmental on November 5, 2024 and sell it today you would earn a total of  51.00  from holding Shanghai CEO Environmental or generate 6.28% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

PetroChina Co Ltd  vs.  Shanghai CEO Environmental

 Performance 
       Timeline  
PetroChina 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in PetroChina Co Ltd are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.
Shanghai CEO Environ 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Shanghai CEO Environmental 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.

PetroChina and Shanghai CEO Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with PetroChina and Shanghai CEO

The main advantage of trading using opposite PetroChina and Shanghai CEO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PetroChina position performs unexpectedly, Shanghai CEO 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 Shanghai CEO will offset losses from the drop in Shanghai CEO's long position.
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The idea behind PetroChina Co Ltd and Shanghai CEO Environmental 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.

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