Correlation Between PetroChina and SUNSEA Telecommunicatio

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

Diversification Opportunities for PetroChina and SUNSEA Telecommunicatio

-0.75

Correlation Coefficient

PetroChina  SUNSEA Telecommunicatio

Pay attention - limited upside

The 3 months correlation between PetroChina and SUNSEA is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding PetroChina Co Ltd and SUNSEA Telecommunications Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SUNSEA Telecommunicatio 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 SUNSEA Telecommunicatio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SUNSEA Telecommunicatio has no effect on the direction of PetroChina i.e., PetroChina and SUNSEA Telecommunicatio go up and down completely randomly.

Pair Corralation between PetroChina and SUNSEA Telecommunicatio

Assuming the 90 days trading horizon PetroChina Co Ltd is expected to under-perform the SUNSEA Telecommunicatio. But the stock apears to be less risky and, when comparing its historical volatility, PetroChina Co Ltd is 4.44 times less risky than SUNSEA Telecommunicatio. The stock trades about -0.14 of its potential returns per unit of risk. The SUNSEA Telecommunications Co is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  840.00  in SUNSEA Telecommunications Co on December 27, 2024 and sell it today you would earn a total of  147.00  from holding SUNSEA Telecommunications Co or generate 17.5% return on investment over 90 days.

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

PetroChina Co Ltd  vs.  SUNSEA Telecommunications Co

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 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.

SUNSEA Telecommunicatio

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SUNSEA Telecommunications Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, SUNSEA Telecommunicatio sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PetroChina and SUNSEA Telecommunicatio

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

The idea behind PetroChina Co Ltd and SUNSEA Telecommunications Co 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.