Correlation Between PetroChina and Xingyuan Environment

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

Diversification Opportunities for PetroChina and Xingyuan Environment

0.15

Correlation Coefficient

PetroChina  Xingyuan Environment

Average diversification

The 3 months correlation between PetroChina and Xingyuan is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding PetroChina Co Ltd and Xingyuan Environment Technolog in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xingyuan Environment 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 Xingyuan Environment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xingyuan Environment has no effect on the direction of PetroChina i.e., PetroChina and Xingyuan Environment go up and down completely randomly.

Pair Corralation between PetroChina and Xingyuan Environment

Assuming the 90 days trading horizon PetroChina Co Ltd is expected to generate 0.39 times more return on investment than Xingyuan Environment. However, PetroChina Co Ltd is 2.54 times less risky than Xingyuan Environment. It trades about -0.14 of its potential returns per unit of risk. Xingyuan Environment Technology is currently generating about -0.07 per unit of risk. If you would invest  900.00  in PetroChina Co Ltd on December 28, 2024 and sell it today you would lose (82.00) from holding PetroChina Co Ltd or give up 9.11% of portfolio value over 90 days.

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

PetroChina Co Ltd  vs.  Xingyuan Environment Technolog

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.

Xingyuan Environment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Xingyuan Environment Technology 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 Xingyuan Environment

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

The idea behind PetroChina Co Ltd and Xingyuan Environment Technology 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.