Correlation Between PetroChina and Sichuan Road

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

Diversification Opportunities for PetroChina and Sichuan Road

-0.33

Correlation Coefficient

PetroChina  Sichuan Road

Very good diversification

The 3 months correlation between PetroChina and Sichuan is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding PetroChina Co Ltd and Sichuan Road Bridge in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sichuan Road Bridge 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 Sichuan Road. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sichuan Road Bridge has no effect on the direction of PetroChina i.e., PetroChina and Sichuan Road go up and down completely randomly.

Pair Corralation between PetroChina and Sichuan Road

Assuming the 90 days trading horizon PetroChina Co Ltd is expected to under-perform the Sichuan Road. But the stock apears to be less risky and, when comparing its historical volatility, PetroChina Co Ltd is 1.14 times less risky than Sichuan Road. The stock trades about -0.14 of its potential returns per unit of risk. The Sichuan Road Bridge is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  729.00  in Sichuan Road Bridge on December 27, 2024 and sell it today you would earn a total of  82.00  from holding Sichuan Road Bridge or generate 11.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.28%
Values	Daily Returns

PetroChina Co Ltd  vs.  Sichuan Road Bridge

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.

Sichuan Road Bridge

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sichuan Road Bridge are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sichuan Road may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with PetroChina and Sichuan Road

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

The idea behind PetroChina Co Ltd and Sichuan Road Bridge 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.