Correlation Between PetroChina and Integrated Electronic

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

Diversification Opportunities for PetroChina and Integrated Electronic

-0.23

Correlation Coefficient

PetroChina  Integrated Electronic

Very good diversification

The 3 months correlation between PetroChina and Integrated is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding PetroChina Co Ltd and Integrated Electronic Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Integrated Electronic 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 Integrated Electronic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Integrated Electronic has no effect on the direction of PetroChina i.e., PetroChina and Integrated Electronic go up and down completely randomly.

Pair Corralation between PetroChina and Integrated Electronic

Assuming the 90 days trading horizon PetroChina is expected to generate 42.57 times less return on investment than Integrated Electronic. But when comparing it to its historical volatility, PetroChina Co Ltd is 1.6 times less risky than Integrated Electronic. It trades about 0.01 of its potential returns per unit of risk. Integrated Electronic Systems is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  537.00  in Integrated Electronic Systems on September 5, 2024 and sell it today you would earn a total of  250.00  from holding Integrated Electronic Systems or generate 46.55% 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.  Integrated Electronic Systems

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.

Integrated Electronic

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Integrated Electronic Systems are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Integrated Electronic sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PetroChina and Integrated Electronic

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

The idea behind PetroChina Co Ltd and Integrated Electronic Systems 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.