Correlation Between PetroChina and Jiangxi Naipu

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

Diversification Opportunities for PetroChina and Jiangxi Naipu

0.21

Correlation Coefficient

PetroChina  Jiangxi Naipu

Modest diversification

The 3 months correlation between PetroChina and Jiangxi is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding PetroChina Co Ltd and Jiangxi Naipu Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangxi Naipu Mining 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 Jiangxi Naipu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangxi Naipu Mining has no effect on the direction of PetroChina i.e., PetroChina and Jiangxi Naipu go up and down completely randomly.

Pair Corralation between PetroChina and Jiangxi Naipu

Assuming the 90 days trading horizon PetroChina is expected to generate 2.92 times less return on investment than Jiangxi Naipu. But when comparing it to its historical volatility, PetroChina Co Ltd is 1.59 times less risky than Jiangxi Naipu. It trades about 0.09 of its potential returns per unit of risk. Jiangxi Naipu Mining is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  2,207  in Jiangxi Naipu Mining on September 13, 2024 and sell it today you would earn a total of  728.00  from holding Jiangxi Naipu Mining or generate 32.99% return on investment over 90 days.

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

PetroChina Co Ltd  vs.  Jiangxi Naipu Mining

PetroChina

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PetroChina Co Ltd are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, PetroChina may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Jiangxi Naipu Mining

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Jiangxi Naipu Mining are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jiangxi Naipu sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PetroChina and Jiangxi Naipu

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

The idea behind PetroChina Co Ltd and Jiangxi Naipu Mining 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.