Correlation Between PetroChina and AVCON Information

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

Diversification Opportunities for PetroChina and AVCON Information

-0.62

Correlation Coefficient

PetroChina  AVCON Information

Excellent diversification

The 3 months correlation between PetroChina and AVCON is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding PetroChina Co Ltd and AVCON Information Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AVCON Information Tech 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 AVCON Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AVCON Information Tech has no effect on the direction of PetroChina i.e., PetroChina and AVCON Information go up and down completely randomly.

Pair Corralation between PetroChina and AVCON Information

Assuming the 90 days trading horizon PetroChina Co Ltd is expected to generate 0.39 times more return on investment than AVCON Information. However, PetroChina Co Ltd is 2.56 times less risky than AVCON Information. It trades about 0.07 of its potential returns per unit of risk. AVCON Information Tech is currently generating about -0.03 per unit of risk. If you would invest  845.00  in PetroChina Co Ltd on October 9, 2024 and sell it today you would earn a total of  46.00  from holding PetroChina Co Ltd or generate 5.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

PetroChina Co Ltd  vs.  AVCON Information Tech

PetroChina

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PetroChina Co Ltd are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. 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.

AVCON Information Tech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AVCON Information Tech 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.

Pair Trading with PetroChina and AVCON Information

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

The idea behind PetroChina Co Ltd and AVCON Information Tech 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.