Correlation Between Suzhou Dongshan and PetroChina

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

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

Diversification Opportunities for Suzhou Dongshan and PetroChina

-0.05

Correlation Coefficient

Suzhou Dongshan  PetroChina

Good diversification

The 3 months correlation between Suzhou and PetroChina is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Suzhou Dongshan Precision and PetroChina Co Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PetroChina and Suzhou Dongshan 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 Suzhou Dongshan Precision 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 Suzhou Dongshan i.e., Suzhou Dongshan and PetroChina go up and down completely randomly.

Pair Corralation between Suzhou Dongshan and PetroChina

Assuming the 90 days trading horizon Suzhou Dongshan Precision is expected to generate 2.93 times more return on investment than PetroChina. However, Suzhou Dongshan is 2.93 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 0.06 per unit of risk. If you would invest  2,296  in Suzhou Dongshan Precision on October 9, 2024 and sell it today you would earn a total of  612.00  from holding Suzhou Dongshan Precision or generate 26.66% return on investment over 90 days.

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

Suzhou Dongshan Precision  vs.  PetroChina Co Ltd

Suzhou Dongshan Precision

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Suzhou Dongshan Precision are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Suzhou Dongshan sustained solid returns over the last few months and may actually be approaching a breakup point.

PetroChina

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PetroChina Co Ltd are ranked lower than 4 (%) 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 Suzhou Dongshan and PetroChina

The main advantage of trading using opposite Suzhou Dongshan and PetroChina positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Suzhou Dongshan 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 Suzhou Dongshan Precision 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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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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.