Correlation Between PetroChina and Xiamen ITG

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

Diversification Opportunities for PetroChina and Xiamen ITG

-0.3

Correlation Coefficient

PetroChina  Xiamen ITG

Very good diversification

The 3 months correlation between PetroChina and Xiamen is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding PetroChina Co Ltd and Xiamen ITG Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xiamen ITG Group 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 Xiamen ITG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xiamen ITG Group has no effect on the direction of PetroChina i.e., PetroChina and Xiamen ITG go up and down completely randomly.

Pair Corralation between PetroChina and Xiamen ITG

Assuming the 90 days trading horizon PetroChina Co Ltd is expected to generate 1.24 times more return on investment than Xiamen ITG. However, PetroChina is 1.24 times more volatile than Xiamen ITG Group. It trades about 0.26 of its potential returns per unit of risk. Xiamen ITG Group is currently generating about -0.34 per unit of risk. If you would invest  836.00  in PetroChina Co Ltd on October 11, 2024 and sell it today you would earn a total of  69.00  from holding PetroChina Co Ltd or generate 8.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

PetroChina Co Ltd  vs.  Xiamen ITG Group

PetroChina

Risk-Adjusted Performance

1 of 100

Insignificant

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.

Xiamen ITG Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xiamen ITG Group 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.

Pair Trading with PetroChina and Xiamen ITG

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

The idea behind PetroChina Co Ltd and Xiamen ITG Group 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.