Correlation Between PetroChina and Shenzhen MTC

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

Diversification Opportunities for PetroChina and Shenzhen MTC

0.44

Correlation Coefficient

PetroChina  Shenzhen MTC

Very weak diversification

The 3 months correlation between PetroChina and Shenzhen is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding PetroChina Co Ltd and Shenzhen MTC Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen MTC 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 Shenzhen MTC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen MTC has no effect on the direction of PetroChina i.e., PetroChina and Shenzhen MTC go up and down completely randomly.

Pair Corralation between PetroChina and Shenzhen MTC

Assuming the 90 days trading horizon PetroChina is expected to generate 911.33 times less return on investment than Shenzhen MTC. But when comparing it to its historical volatility, PetroChina Co Ltd is 1.74 times less risky than Shenzhen MTC. It trades about 0.0 of its potential returns per unit of risk. Shenzhen MTC Co is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  538.00  in Shenzhen MTC Co on September 30, 2024 and sell it today you would earn a total of  77.00  from holding Shenzhen MTC Co or generate 14.31% return on investment over 90 days.

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

PetroChina Co Ltd  vs.  Shenzhen MTC Co

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.

Shenzhen MTC

Risk-Adjusted Performance

6 of 100

Modest

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

Pair Trading with PetroChina and Shenzhen MTC

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

The idea behind PetroChina Co Ltd and Shenzhen MTC 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.

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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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.