Correlation Between PetroChina and Zhongfu Information

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

Diversification Opportunities for PetroChina and Zhongfu Information

-0.63

Correlation Coefficient

PetroChina  Zhongfu Information

Excellent diversification

The 3 months correlation between PetroChina and Zhongfu is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding PetroChina Co Ltd and Zhongfu Information in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhongfu Information 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 Zhongfu Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhongfu Information has no effect on the direction of PetroChina i.e., PetroChina and Zhongfu Information go up and down completely randomly.

Pair Corralation between PetroChina and Zhongfu Information

Assuming the 90 days trading horizon PetroChina Co Ltd is expected to generate 0.44 times more return on investment than Zhongfu Information. However, PetroChina Co Ltd is 2.27 times less risky than Zhongfu Information. It trades about 0.27 of its potential returns per unit of risk. Zhongfu Information is currently generating about -0.36 per unit of risk. If you would invest  836.00  in PetroChina Co Ltd on October 11, 2024 and sell it today you would earn a total of  69.00  from holding PetroChina Co Ltd or generate 8.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

PetroChina Co Ltd  vs.  Zhongfu Information

PetroChina

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PetroChina Co Ltd are ranked lower than 4 (%) 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.

Zhongfu Information

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Zhongfu Information are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhongfu Information may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with PetroChina and Zhongfu Information

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

The idea behind PetroChina Co Ltd and Zhongfu Information 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.