Correlation Between Shijiazhuang Tonhe and PetroChina

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

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

Diversification Opportunities for Shijiazhuang Tonhe and PetroChina

0.44

Correlation Coefficient

Shijiazhuang Tonhe  PetroChina

Very weak diversification

The 3 months correlation between Shijiazhuang and PetroChina is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Shijiazhuang Tonhe Electronics and PetroChina Co Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PetroChina and Shijiazhuang Tonhe 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 Shijiazhuang Tonhe Electronics 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 Shijiazhuang Tonhe i.e., Shijiazhuang Tonhe and PetroChina go up and down completely randomly.

Pair Corralation between Shijiazhuang Tonhe and PetroChina

Assuming the 90 days trading horizon Shijiazhuang Tonhe Electronics is expected to generate 1.84 times more return on investment than PetroChina. However, Shijiazhuang Tonhe is 1.84 times more volatile than PetroChina Co Ltd. It trades about 0.16 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  1,296  in Shijiazhuang Tonhe Electronics on September 23, 2024 and sell it today you would earn a total of  518.00  from holding Shijiazhuang Tonhe Electronics or generate 39.97% return on investment over 90 days.

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

Shijiazhuang Tonhe Electronics  vs.  PetroChina Co Ltd

Shijiazhuang Tonhe

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shijiazhuang Tonhe Electronics are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shijiazhuang Tonhe sustained solid returns over the last few months and may actually be approaching a breakup point.

PetroChina

Risk-Adjusted Performance

3 of 100

Insignificant

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 Shijiazhuang Tonhe and PetroChina

The main advantage of trading using opposite Shijiazhuang Tonhe and PetroChina positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shijiazhuang Tonhe 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 Shijiazhuang Tonhe Electronics 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.