Correlation Between PetroChina and De Rucci

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

Diversification Opportunities for PetroChina and De Rucci

0.2

Correlation Coefficient

PetroChina  De Rucci

Modest diversification

The 3 months correlation between PetroChina and 001323 is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding PetroChina Co Ltd and De Rucci Healthy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on De Rucci Healthy 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 De Rucci. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of De Rucci Healthy has no effect on the direction of PetroChina i.e., PetroChina and De Rucci go up and down completely randomly.

Pair Corralation between PetroChina and De Rucci

Assuming the 90 days trading horizon PetroChina Co Ltd is expected to generate 0.84 times more return on investment than De Rucci. However, PetroChina Co Ltd is 1.18 times less risky than De Rucci. It trades about -0.02 of its potential returns per unit of risk. De Rucci Healthy is currently generating about -0.06 per unit of risk. If you would invest  802.00  in PetroChina Co Ltd on December 2, 2024 and sell it today you would lose (16.00) from holding PetroChina Co Ltd or give up 2.0% of portfolio value over 90 days.

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

PetroChina Co Ltd  vs.  De Rucci Healthy

PetroChina

Risk-Adjusted Performance

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.

De Rucci Healthy

Risk-Adjusted Performance

Very Weak

Over the last 90 days De Rucci Healthy 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 PetroChina and De Rucci

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

The idea behind PetroChina Co Ltd and De Rucci Healthy 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.