Correlation Between PetroChina and Jiangxi Sunshine

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

Diversification Opportunities for PetroChina and Jiangxi Sunshine

-0.22

Correlation Coefficient

PetroChina  Jiangxi Sunshine

Very good diversification

The 3 months correlation between PetroChina and Jiangxi is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding PetroChina Co Ltd and Jiangxi Sunshine Dairy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangxi Sunshine Dairy 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 Jiangxi Sunshine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangxi Sunshine Dairy has no effect on the direction of PetroChina i.e., PetroChina and Jiangxi Sunshine go up and down completely randomly.

Pair Corralation between PetroChina and Jiangxi Sunshine

Assuming the 90 days trading horizon PetroChina Co Ltd is expected to generate 0.81 times more return on investment than Jiangxi Sunshine. However, PetroChina Co Ltd is 1.24 times less risky than Jiangxi Sunshine. It trades about -0.11 of its potential returns per unit of risk. Jiangxi Sunshine Dairy is currently generating about -0.13 per unit of risk. If you would invest  858.00  in PetroChina Co Ltd on October 24, 2024 and sell it today you would lose (35.00) from holding PetroChina Co Ltd or give up 4.08% of portfolio value over 90 days.

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

PetroChina Co Ltd  vs.  Jiangxi Sunshine Dairy

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.

Jiangxi Sunshine Dairy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jiangxi Sunshine Dairy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Jiangxi Sunshine 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 Jiangxi Sunshine

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

The idea behind PetroChina Co Ltd and Jiangxi Sunshine Dairy 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.