Correlation Between China Petroleum and PetroChina
Can any of the company-specific risk be diversified away by investing in both China Petroleum 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 China Petroleum and PetroChina into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Petroleum Chemical and PetroChina Co Ltd, you can compare the effects of market volatilities on China Petroleum 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 China Petroleum with a short position of PetroChina. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Petroleum and PetroChina.
Diversification Opportunities for China Petroleum and PetroChina
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between China and PetroChina is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding China Petroleum Chemical and PetroChina Co Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PetroChina and China Petroleum 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 China Petroleum Chemical 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 China Petroleum i.e., China Petroleum and PetroChina go up and down completely randomly.
Pair Corralation between China Petroleum and PetroChina
Assuming the 90 days horizon China Petroleum Chemical is expected to generate 6.65 times more return on investment than PetroChina. However, China Petroleum is 6.65 times more volatile than PetroChina Co Ltd. It trades about 0.11 of its potential returns per unit of risk. PetroChina Co Ltd is currently generating about 0.02 per unit of risk. If you would invest 24.00 in China Petroleum Chemical on August 27, 2024 and sell it today you would earn a total of 29.00 from holding China Petroleum Chemical or generate 120.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 98.4% |
| Values | Daily Returns |
China Petroleum Chemical vs. PetroChina Co Ltd
Performance |
| Timeline |
| China Petroleum Chemical |
| PetroChina |
China Petroleum and PetroChina Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Petroleum and PetroChina
The main advantage of trading using opposite China Petroleum and PetroChina positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Petroleum 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.| China Petroleum vs. BP plc | China Petroleum vs. Shell PLC | China Petroleum vs. Origin Energy Ltd | China Petroleum vs. Equinor ASA |
| PetroChina vs. Equinor ASA ADR | PetroChina vs. TotalEnergies SE ADR | PetroChina vs. Ecopetrol SA ADR | PetroChina vs. National Fuel Gas |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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