Correlation Between Kweichow Moutai and PetroChina

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

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

Diversification Opportunities for Kweichow Moutai and PetroChina

0.16

Correlation Coefficient

Kweichow Moutai  PetroChina

Average diversification

The 3 months correlation between Kweichow and PetroChina is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Kweichow Moutai Co and PetroChina Co Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PetroChina and Kweichow Moutai 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 Kweichow Moutai Co 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 Kweichow Moutai i.e., Kweichow Moutai and PetroChina go up and down completely randomly.

Pair Corralation between Kweichow Moutai and PetroChina

Assuming the 90 days trading horizon Kweichow Moutai Co is expected to generate 1.2 times more return on investment than PetroChina. However, Kweichow Moutai is 1.2 times more volatile than PetroChina Co Ltd. It trades about 0.07 of its potential returns per unit of risk. PetroChina Co Ltd is currently generating about -0.07 per unit of risk. If you would invest  139,500  in Kweichow Moutai Co on August 31, 2024 and sell it today you would earn a total of  12,300  from holding Kweichow Moutai Co or generate 8.82% return on investment over 90 days.

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

Kweichow Moutai Co  vs.  PetroChina Co Ltd

Kweichow Moutai

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kweichow Moutai Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Kweichow Moutai may actually be approaching a critical reversion point that can send shares even higher in December 2024.

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 latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Kweichow Moutai and PetroChina

The main advantage of trading using opposite Kweichow Moutai and PetroChina positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kweichow Moutai 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 Kweichow Moutai Co 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.