Correlation Between PetroChina and Konfoong Materials

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

Diversification Opportunities for PetroChina and Konfoong Materials

-0.45

Correlation Coefficient

PetroChina  Konfoong Materials

Very good diversification

The 3 months correlation between PetroChina and Konfoong is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding PetroChina Co Ltd and Konfoong Materials Internation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Konfoong Materials 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 Konfoong Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Konfoong Materials has no effect on the direction of PetroChina i.e., PetroChina and Konfoong Materials go up and down completely randomly.

Pair Corralation between PetroChina and Konfoong Materials

Assuming the 90 days trading horizon PetroChina Co Ltd is expected to generate 0.67 times more return on investment than Konfoong Materials. However, PetroChina Co Ltd is 1.49 times less risky than Konfoong Materials. It trades about 0.0 of its potential returns per unit of risk. Konfoong Materials International is currently generating about -0.09 per unit of risk. If you would invest  858.00  in PetroChina Co Ltd on October 23, 2024 and sell it today you would lose (1.00) from holding PetroChina Co Ltd or give up 0.12% of portfolio value over 90 days.

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

PetroChina Co Ltd  vs.  Konfoong Materials Internation

PetroChina

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PetroChina Co Ltd are ranked lower than 1 (%) 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.

Konfoong Materials

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Konfoong Materials International are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Konfoong Materials may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with PetroChina and Konfoong Materials

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

The idea behind PetroChina Co Ltd and Konfoong Materials International 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..