Correlation Between Huasi Agricultural and PetroChina

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

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

Diversification Opportunities for Huasi Agricultural and PetroChina

-0.33

Correlation Coefficient

Huasi Agricultural  PetroChina

Very good diversification

The 3 months correlation between Huasi and PetroChina is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Huasi Agricultural Development and PetroChina Co Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PetroChina and Huasi Agricultural 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 Huasi Agricultural Development 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 Huasi Agricultural i.e., Huasi Agricultural and PetroChina go up and down completely randomly.

Pair Corralation between Huasi Agricultural and PetroChina

Assuming the 90 days trading horizon Huasi Agricultural Development is expected to under-perform the PetroChina. In addition to that, Huasi Agricultural is 2.19 times more volatile than PetroChina Co Ltd. It trades about -0.01 of its total potential returns per unit of risk. PetroChina Co Ltd is currently generating about -0.02 per unit of volatility. If you would invest  802.00  in PetroChina Co Ltd on December 2, 2024 and sell it today you would lose (16.00) from holding PetroChina Co Ltd or give up 2.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.31%
Values	Daily Returns

Huasi Agricultural Development  vs.  PetroChina Co Ltd

Huasi Agricultural

Risk-Adjusted Performance

Very Weak

Over the last 90 days Huasi Agricultural Development has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Huasi Agricultural 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

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 Huasi Agricultural and PetroChina

The main advantage of trading using opposite Huasi Agricultural and PetroChina positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Huasi Agricultural 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 Huasi Agricultural Development 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..