Correlation Between PetroChina and Shenzhen Shenbao

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

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

Diversification Opportunities for PetroChina and Shenzhen Shenbao

-0.47

Correlation Coefficient

PetroChina  Shenzhen Shenbao

Very good diversification

The 3 months correlation between PetroChina and Shenzhen is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding PetroChina Co Ltd and Shenzhen Shenbao Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Shenbao Ind and PetroChina 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 PetroChina Co Ltd are associated (or correlated) with Shenzhen Shenbao. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Shenbao Ind has no effect on the direction of PetroChina i.e., PetroChina and Shenzhen Shenbao go up and down completely randomly.

Pair Corralation between PetroChina and Shenzhen Shenbao

Assuming the 90 days trading horizon PetroChina Co Ltd is expected to generate 0.75 times more return on investment than Shenzhen Shenbao. However, PetroChina Co Ltd is 1.33 times less risky than Shenzhen Shenbao. It trades about 0.2 of its potential returns per unit of risk. Shenzhen Shenbao Industrial is currently generating about -0.24 per unit of risk. If you would invest  843.00  in PetroChina Co Ltd on October 9, 2024 and sell it today you would earn a total of  48.00  from holding PetroChina Co Ltd or generate 5.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

PetroChina Co Ltd  vs.  Shenzhen Shenbao Industrial

PetroChina

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PetroChina Co Ltd are ranked lower than 5 (%) 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.

Shenzhen Shenbao Ind

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shenzhen Shenbao Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Shenzhen Shenbao is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with PetroChina and Shenzhen Shenbao

The main advantage of trading using opposite PetroChina and Shenzhen Shenbao positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PetroChina position performs unexpectedly, Shenzhen Shenbao 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 Shenzhen Shenbao will offset losses from the drop in Shenzhen Shenbao's long position.

The idea behind PetroChina Co Ltd and Shenzhen Shenbao Industrial 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.