Correlation Between PetroChina and Dalian Zeus

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

Diversification Opportunities for PetroChina and Dalian Zeus

-0.29

Correlation Coefficient

PetroChina  Dalian Zeus

Very good diversification

The 3 months correlation between PetroChina and Dalian is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding PetroChina Co Ltd and Dalian Zeus Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dalian Zeus Entertainment 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 Dalian Zeus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dalian Zeus Entertainment has no effect on the direction of PetroChina i.e., PetroChina and Dalian Zeus go up and down completely randomly.

Pair Corralation between PetroChina and Dalian Zeus

Assuming the 90 days trading horizon PetroChina Co Ltd is expected to under-perform the Dalian Zeus. But the stock apears to be less risky and, when comparing its historical volatility, PetroChina Co Ltd is 7.02 times less risky than Dalian Zeus. The stock trades about -0.12 of its potential returns per unit of risk. The Dalian Zeus Entertainment is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest  371.00  in Dalian Zeus Entertainment on September 4, 2024 and sell it today you would earn a total of  162.00  from holding Dalian Zeus Entertainment or generate 43.67% 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.  Dalian Zeus Entertainment

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.

Dalian Zeus Entertainment

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dalian Zeus Entertainment are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dalian Zeus sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PetroChina and Dalian Zeus

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

The idea behind PetroChina Co Ltd and Dalian Zeus Entertainment 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.