Correlation Between Henan Shuanghui and PetroChina

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

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

Diversification Opportunities for Henan Shuanghui and PetroChina

0.59

Correlation Coefficient

Henan Shuanghui  PetroChina

Very weak diversification

The 3 months correlation between Henan and PetroChina is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Henan Shuanghui Investment and PetroChina Co Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PetroChina and Henan Shuanghui 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 Henan Shuanghui Investment 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 Henan Shuanghui i.e., Henan Shuanghui and PetroChina go up and down completely randomly.

Pair Corralation between Henan Shuanghui and PetroChina

Assuming the 90 days trading horizon Henan Shuanghui is expected to generate 3.37 times less return on investment than PetroChina. But when comparing it to its historical volatility, Henan Shuanghui Investment is 1.72 times less risky than PetroChina. It trades about 0.11 of its potential returns per unit of risk. PetroChina Co Ltd is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  810.00  in PetroChina Co Ltd on October 4, 2024 and sell it today you would earn a total of  67.00  from holding PetroChina Co Ltd or generate 8.27% return on investment over 90 days.

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

Henan Shuanghui Investment  vs.  PetroChina Co Ltd

Henan Shuanghui Inve

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Henan Shuanghui Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Henan Shuanghui is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

PetroChina

Risk-Adjusted Performance

0 of 100

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.

Pair Trading with Henan Shuanghui and PetroChina

The main advantage of trading using opposite Henan Shuanghui and PetroChina positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Henan Shuanghui 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 Henan Shuanghui Investment 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.