Correlation Between PetroChina and Bank of Nanjing

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

Diversification Opportunities for PetroChina and Bank of Nanjing

PetroChinaBankDiversified AwayPetroChinaBankDiversified Away100%
0.59
  Correlation Coefficient

Very weak diversification

The 3 months correlation between PetroChina and Bank is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding PetroChina Co Ltd and Bank of Nanjing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of Nanjing 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 Bank of Nanjing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of Nanjing has no effect on the direction of PetroChina i.e., PetroChina and Bank of Nanjing go up and down completely randomly.

Pair Corralation between PetroChina and Bank of Nanjing

Assuming the 90 days trading horizon PetroChina Co Ltd is expected to generate 1.21 times more return on investment than Bank of Nanjing. However, PetroChina is 1.21 times more volatile than Bank of Nanjing. It trades about 0.07 of its potential returns per unit of risk. Bank of Nanjing is currently generating about 0.03 per unit of risk. If you would invest  838.00  in PetroChina Co Ltd on September 27, 2024 and sell it today you would earn a total of  64.00  from holding PetroChina Co Ltd or generate 7.64% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy98.33%
ValuesDaily Returns

PetroChina Co Ltd  vs.  Bank of Nanjing

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec 05101520
JavaScript chart by amCharts 3.21.15601857 601009
       Timeline  
PetroChina 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in PetroChina Co Ltd are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, PetroChina may actually be approaching a critical reversion point that can send shares even higher in January 2025.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec88.599.510
Bank of Nanjing 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Bank of Nanjing are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Bank of Nanjing is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec1010.51111.512

PetroChina and Bank of Nanjing Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-6.62-4.96-3.29-1.630.02771.73.465.216.978.73 0.020.040.060.080.100.12
JavaScript chart by amCharts 3.21.15601857 601009
       Returns  

Pair Trading with PetroChina and Bank of Nanjing

The main advantage of trading using opposite PetroChina and Bank of Nanjing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PetroChina position performs unexpectedly, Bank of Nanjing 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 Bank of Nanjing will offset losses from the drop in Bank of Nanjing's long position.
The idea behind PetroChina Co Ltd and Bank of Nanjing 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.
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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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..

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