Correlation Between PetroChina Company and China Petroleum
Can any of the company-specific risk be diversified away by investing in both PetroChina Company and China Petroleum 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 Company and China Petroleum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PetroChina Company Limited and China Petroleum Chemical, you can compare the effects of market volatilities on PetroChina Company and China Petroleum 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 Company with a short position of China Petroleum. Check out your portfolio center. Please also check ongoing floating volatility patterns of PetroChina Company and China Petroleum.
Diversification Opportunities for PetroChina Company and China Petroleum
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between PetroChina and China is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding PetroChina Company Limited and China Petroleum Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Petroleum Chemical and PetroChina Company 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 Company Limited are associated (or correlated) with China Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Petroleum Chemical has no effect on the direction of PetroChina Company i.e., PetroChina Company and China Petroleum go up and down completely randomly.
Pair Corralation between PetroChina Company and China Petroleum
Assuming the 90 days horizon PetroChina Company Limited is expected to under-perform the China Petroleum. But the stock apears to be less risky and, when comparing its historical volatility, PetroChina Company Limited is 1.26 times less risky than China Petroleum. The stock trades about -0.07 of its potential returns per unit of risk. The China Petroleum Chemical is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest 52.00 in China Petroleum Chemical on August 30, 2024 and sell it today you would lose (1.00) from holding China Petroleum Chemical or give up 1.92% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
PetroChina Company Limited vs. China Petroleum Chemical
Performance |
| Timeline |
| PetroChina Limited |
| China Petroleum Chemical |
PetroChina Company and China Petroleum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PetroChina Company and China Petroleum
The main advantage of trading using opposite PetroChina Company and China Petroleum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PetroChina Company position performs unexpectedly, China Petroleum 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 China Petroleum will offset losses from the drop in China Petroleum's long position.| PetroChina Company vs. Diamyd Medical AB | PetroChina Company vs. Motorcar Parts of | PetroChina Company vs. HK Electric Investments | PetroChina Company vs. CompuGroup Medical SE |
| China Petroleum vs. Flutter Entertainment PLC | China Petroleum vs. TIANDE CHEMICAL | China Petroleum vs. ATRESMEDIA | China Petroleum vs. CHEMICAL INDUSTRIES |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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