Correlation Between Shenzhen SDG and PetroChina

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

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

Diversification Opportunities for Shenzhen SDG and PetroChina

0.35

Correlation Coefficient

Shenzhen SDG  PetroChina

Weak diversification

The 3 months correlation between Shenzhen and PetroChina is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen SDG Service and PetroChina Co Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PetroChina and Shenzhen SDG 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 Shenzhen SDG Service 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 Shenzhen SDG i.e., Shenzhen SDG and PetroChina go up and down completely randomly.

Pair Corralation between Shenzhen SDG and PetroChina

Assuming the 90 days trading horizon Shenzhen SDG Service is expected to under-perform the PetroChina. In addition to that, Shenzhen SDG is 2.02 times more volatile than PetroChina Co Ltd. It trades about -0.11 of its total potential returns per unit of risk. PetroChina Co Ltd is currently generating about 0.28 per unit of volatility. If you would invest  803.00  in PetroChina Co Ltd on September 25, 2024 and sell it today you would earn a total of  75.00  from holding PetroChina Co Ltd or generate 9.34% return on investment over 90 days.

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

Shenzhen SDG Service  vs.  PetroChina Co Ltd

Shenzhen SDG Service

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen SDG Service are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen SDG sustained solid returns over the last few months and may actually be approaching a breakup point.

PetroChina

Risk-Adjusted Performance

3 of 100

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 Shenzhen SDG and PetroChina

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