Correlation Between PetroChina and Wuhan Xianglong

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

Diversification Opportunities for PetroChina and Wuhan Xianglong

-0.81

Correlation Coefficient

PetroChina  Wuhan Xianglong

Pay attention - limited upside

The 3 months correlation between PetroChina and Wuhan is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding PetroChina Co Ltd and Wuhan Xianglong Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wuhan Xianglong Power 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 Wuhan Xianglong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wuhan Xianglong Power has no effect on the direction of PetroChina i.e., PetroChina and Wuhan Xianglong go up and down completely randomly.

Pair Corralation between PetroChina and Wuhan Xianglong

Assuming the 90 days trading horizon PetroChina Co Ltd is expected to generate 0.3 times more return on investment than Wuhan Xianglong. However, PetroChina Co Ltd is 3.36 times less risky than Wuhan Xianglong. It trades about -0.01 of its potential returns per unit of risk. Wuhan Xianglong Power is currently generating about -0.02 per unit of risk. If you would invest  839.00  in PetroChina Co Ltd on October 25, 2024 and sell it today you would lose (16.00) from holding PetroChina Co Ltd or give up 1.91% of portfolio value over 90 days.

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

PetroChina Co Ltd  vs.  Wuhan Xianglong Power

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.

Wuhan Xianglong Power

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wuhan Xianglong Power has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Wuhan Xianglong is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with PetroChina and Wuhan Xianglong

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

The idea behind PetroChina Co Ltd and Wuhan Xianglong Power 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.