Correlation Between Bengang Steel and PetroChina

Can any of the company-specific risk be diversified away by investing in both Bengang Steel 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 Bengang Steel and PetroChina into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bengang Steel Plates and PetroChina Co Ltd, you can compare the effects of market volatilities on Bengang Steel 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 Bengang Steel with a short position of PetroChina. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bengang Steel and PetroChina.

Diversification Opportunities for Bengang Steel and PetroChina

-0.07

Correlation Coefficient

Bengang Steel  PetroChina

Good diversification

The 3 months correlation between Bengang and PetroChina is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Bengang Steel Plates and PetroChina Co Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PetroChina and Bengang Steel 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 Bengang Steel Plates 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 Bengang Steel i.e., Bengang Steel and PetroChina go up and down completely randomly.

Pair Corralation between Bengang Steel and PetroChina

Assuming the 90 days trading horizon Bengang Steel Plates is expected to generate 1.74 times more return on investment than PetroChina. However, Bengang Steel is 1.74 times more volatile than PetroChina Co Ltd. It trades about 0.22 of its potential returns per unit of risk. PetroChina Co Ltd is currently generating about 0.04 per unit of risk. If you would invest  228.00  in Bengang Steel Plates on September 5, 2024 and sell it today you would earn a total of  128.00  from holding Bengang Steel Plates or generate 56.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Bengang Steel Plates  vs.  PetroChina Co Ltd

Bengang Steel Plates

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bengang Steel Plates are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Bengang Steel sustained solid returns over the last few months and may actually be approaching a breakup point.

PetroChina

Risk-Adjusted Performance

3 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PetroChina Co Ltd are ranked lower than 3 (%) 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.

Pair Trading with Bengang Steel and PetroChina

The main advantage of trading using opposite Bengang Steel and PetroChina positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bengang Steel 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.

The idea behind Bengang Steel Plates 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.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.