Correlation Between PetroChina and Gem Year

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

Diversification Opportunities for PetroChina and Gem Year

-0.34

Correlation Coefficient

PetroChina  Gem Year

Very good diversification

The 3 months correlation between PetroChina and Gem is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding PetroChina Co Ltd and Gem Year Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gem Year Industrial 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 Gem Year. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gem Year Industrial has no effect on the direction of PetroChina i.e., PetroChina and Gem Year go up and down completely randomly.

Pair Corralation between PetroChina and Gem Year

Assuming the 90 days trading horizon PetroChina Co Ltd is expected to under-perform the Gem Year. But the stock apears to be less risky and, when comparing its historical volatility, PetroChina Co Ltd is 1.41 times less risky than Gem Year. The stock trades about -0.05 of its potential returns per unit of risk. The Gem Year Industrial Co is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  295.00  in Gem Year Industrial Co on September 3, 2024 and sell it today you would earn a total of  149.00  from holding Gem Year Industrial Co or generate 50.51% return on investment over 90 days.

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

PetroChina Co Ltd  vs.  Gem Year Industrial Co

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 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.

Gem Year Industrial

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Gem Year Industrial Co are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Gem Year sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PetroChina and Gem Year

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

The idea behind PetroChina Co Ltd and Gem Year Industrial Co 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.