Correlation Between PetroChina and Chengdu B

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

Diversification Opportunities for PetroChina and Chengdu B

0.26

Correlation Coefficient

PetroChina  Chengdu B

Modest diversification

The 3 months correlation between PetroChina and Chengdu is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding PetroChina Co Ltd and Chengdu B ray Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chengdu B ray 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 Chengdu B. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chengdu B ray has no effect on the direction of PetroChina i.e., PetroChina and Chengdu B go up and down completely randomly.

Pair Corralation between PetroChina and Chengdu B

Assuming the 90 days trading horizon PetroChina is expected to generate 6.14 times less return on investment than Chengdu B. But when comparing it to its historical volatility, PetroChina Co Ltd is 3.97 times less risky than Chengdu B. It trades about 0.15 of its potential returns per unit of risk. Chengdu B ray Media is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  465.00  in Chengdu B ray Media on September 23, 2024 and sell it today you would earn a total of  120.00  from holding Chengdu B ray Media or generate 25.81% 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.  Chengdu B ray Media

PetroChina

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PetroChina Co Ltd are ranked lower than 3 (%) 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.

Chengdu B ray

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chengdu B ray Media are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Chengdu B sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PetroChina and Chengdu B

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

The idea behind PetroChina Co Ltd and Chengdu B ray Media 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.