Correlation Between PetroChina and Sublime China

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

Diversification Opportunities for PetroChina and Sublime China

-0.47

Correlation Coefficient

PetroChina  Sublime China

Very good diversification

The 3 months correlation between PetroChina and Sublime is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding PetroChina Co Ltd and Sublime China Information in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sublime China 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 Sublime China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sublime China Information has no effect on the direction of PetroChina i.e., PetroChina and Sublime China go up and down completely randomly.

Pair Corralation between PetroChina and Sublime China

Assuming the 90 days trading horizon PetroChina Co Ltd is expected to under-perform the Sublime China. But the stock apears to be less risky and, when comparing its historical volatility, PetroChina Co Ltd is 4.19 times less risky than Sublime China. The stock trades about -0.14 of its potential returns per unit of risk. The Sublime China Information is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  5,974  in Sublime China Information on December 28, 2024 and sell it today you would earn a total of  471.00  from holding Sublime China Information or generate 7.88% return on investment over 90 days.

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

PetroChina Co Ltd  vs.  Sublime China Information

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.

Sublime China Information

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sublime China Information are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sublime China sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PetroChina and Sublime China

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

The idea behind PetroChina Co Ltd and Sublime China 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.

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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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.