Correlation Between PetroChina and Guangdong Jinma

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

Diversification Opportunities for PetroChina and Guangdong Jinma

-0.09

Correlation Coefficient

PetroChina  Guangdong Jinma

Good diversification

The 3 months correlation between PetroChina and Guangdong is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding PetroChina Co Ltd and Guangdong Jinma Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Jinma Ente 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 Guangdong Jinma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangdong Jinma Ente has no effect on the direction of PetroChina i.e., PetroChina and Guangdong Jinma go up and down completely randomly.

Pair Corralation between PetroChina and Guangdong Jinma

Assuming the 90 days trading horizon PetroChina is expected to generate 388.0 times less return on investment than Guangdong Jinma. But when comparing it to its historical volatility, PetroChina Co Ltd is 2.04 times less risky than Guangdong Jinma. It trades about 0.0 of its potential returns per unit of risk. Guangdong Jinma Entertainment is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,514  in Guangdong Jinma Entertainment on September 30, 2024 and sell it today you would earn a total of  37.00  from holding Guangdong Jinma Entertainment or generate 2.44% return on investment over 90 days.

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

PetroChina Co Ltd  vs.  Guangdong Jinma Entertainment

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.

Guangdong Jinma Ente

Risk-Adjusted Performance

2 of 100

Weak

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

Pair Trading with PetroChina and Guangdong Jinma

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

The idea behind PetroChina Co Ltd and Guangdong Jinma Entertainment 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.