Correlation Between PetroChina and Fujian Newland

Can any of the company-specific risk be diversified away by investing in both PetroChina and Fujian Newland 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 Fujian Newland 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 Fujian Newland Computer, you can compare the effects of market volatilities on PetroChina and Fujian Newland 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 Fujian Newland. Check out your portfolio center. Please also check ongoing floating volatility patterns of PetroChina and Fujian Newland.

Diversification Opportunities for PetroChina and Fujian Newland

-0.25

Correlation Coefficient

PetroChina  Fujian Newland

Very good diversification

The 3 months correlation between PetroChina and Fujian is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding PetroChina Co Ltd and Fujian Newland Computer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fujian Newland Computer 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 Fujian Newland. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fujian Newland Computer has no effect on the direction of PetroChina i.e., PetroChina and Fujian Newland go up and down completely randomly.

Pair Corralation between PetroChina and Fujian Newland

Assuming the 90 days trading horizon PetroChina Co Ltd is expected to generate 0.77 times more return on investment than Fujian Newland. However, PetroChina Co Ltd is 1.29 times less risky than Fujian Newland. It trades about 0.07 of its potential returns per unit of risk. Fujian Newland Computer is currently generating about 0.04 per unit of risk. If you would invest  495.00  in PetroChina Co Ltd on October 9, 2024 and sell it today you would earn a total of  396.00  from holding PetroChina Co Ltd or generate 80.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.79%
Values	Daily Returns

PetroChina Co Ltd  vs.  Fujian Newland Computer

PetroChina

Risk-Adjusted Performance

5 of 100

Very Weak

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.

Fujian Newland Computer

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fujian Newland Computer are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Fujian Newland may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with PetroChina and Fujian Newland

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

The idea behind PetroChina Co Ltd and Fujian Newland Computer 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.