Correlation Between Mengtian Home and PetroChina

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Can any of the company-specific risk be diversified away by investing in both Mengtian Home and PetroChina 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 Mengtian Home and PetroChina into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mengtian Home Group and PetroChina Co Ltd, you can compare the effects of market volatilities on Mengtian Home and PetroChina 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 Mengtian Home with a short position of PetroChina. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mengtian Home and PetroChina.

Diversification Opportunities for Mengtian Home and PetroChina

-0.2
  Correlation Coefficient

Good diversification

The 3 months correlation between Mengtian and PetroChina is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Mengtian Home Group and PetroChina Co Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PetroChina and Mengtian Home 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 Mengtian Home Group are associated (or correlated) with PetroChina. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PetroChina has no effect on the direction of Mengtian Home i.e., Mengtian Home and PetroChina go up and down completely randomly.

Pair Corralation between Mengtian Home and PetroChina

Assuming the 90 days trading horizon Mengtian Home Group is expected to under-perform the PetroChina. In addition to that, Mengtian Home is 1.2 times more volatile than PetroChina Co Ltd. It trades about -0.01 of its total potential returns per unit of risk. PetroChina Co Ltd is currently generating about 0.06 per unit of volatility. If you would invest  499.00  in PetroChina Co Ltd on September 4, 2024 and sell it today you would earn a total of  303.00  from holding PetroChina Co Ltd or generate 60.72% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Mengtian Home Group  vs.  PetroChina Co Ltd

 Performance 
       Timeline  
Mengtian Home Group 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Mengtian Home Group are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Mengtian Home sustained solid returns over the last few months and may actually be approaching a breakup point.
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.

Mengtian Home and PetroChina Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Mengtian Home and PetroChina

The main advantage of trading using opposite Mengtian Home and PetroChina positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mengtian Home position performs unexpectedly, PetroChina 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 PetroChina will offset losses from the drop in PetroChina's long position.
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The idea behind Mengtian Home Group and PetroChina Co Ltd 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.

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