Correlation Between PetroChina and Luolai Home

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

Diversification Opportunities for PetroChina and Luolai Home

-0.14

Correlation Coefficient

PetroChina  Luolai Home

Good diversification

The 3 months correlation between PetroChina and Luolai is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding PetroChina Co Ltd and Luolai Home Textile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Luolai Home Textile 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 Luolai Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Luolai Home Textile has no effect on the direction of PetroChina i.e., PetroChina and Luolai Home go up and down completely randomly.

Pair Corralation between PetroChina and Luolai Home

Assuming the 90 days trading horizon PetroChina Co Ltd is expected to under-perform the Luolai Home. But the stock apears to be less risky and, when comparing its historical volatility, PetroChina Co Ltd is 1.26 times less risky than Luolai Home. The stock trades about -0.01 of its potential returns per unit of risk. The Luolai Home Textile is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  653.00  in Luolai Home Textile on September 4, 2024 and sell it today you would earn a total of  214.00  from holding Luolai Home Textile or generate 32.77% return on investment over 90 days.

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

PetroChina Co Ltd  vs.  Luolai Home Textile

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.

Luolai Home Textile

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Luolai Home Textile are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Luolai Home sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PetroChina and Luolai Home

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

The idea behind PetroChina Co Ltd and Luolai Home Textile 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.