Correlation Between Shandong Publishing and PetroChina

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

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

Diversification Opportunities for Shandong Publishing and PetroChina

0.65

Correlation Coefficient

Shandong Publishing  PetroChina

Poor diversification

The 3 months correlation between Shandong and PetroChina is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Shandong Publishing Media and PetroChina Co Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PetroChina and Shandong Publishing 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 Shandong Publishing Media 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 Shandong Publishing i.e., Shandong Publishing and PetroChina go up and down completely randomly.

Pair Corralation between Shandong Publishing and PetroChina

Assuming the 90 days trading horizon Shandong Publishing Media is expected to under-perform the PetroChina. In addition to that, Shandong Publishing is 1.33 times more volatile than PetroChina Co Ltd. It trades about -0.09 of its total potential returns per unit of risk. PetroChina Co Ltd is currently generating about 0.0 per unit of volatility. If you would invest  902.00  in PetroChina Co Ltd on September 30, 2024 and sell it today you would lose (10.00) from holding PetroChina Co Ltd or give up 1.11% of portfolio value over 90 days.

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

Shandong Publishing Media  vs.  PetroChina Co Ltd

Shandong Publishing Media

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shandong Publishing Media has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

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 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 Shandong Publishing and PetroChina

The main advantage of trading using opposite Shandong Publishing and PetroChina positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shandong Publishing 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 Shandong Publishing Media 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.