Correlation Between PetroChina and Shandong Publishing

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

Diversification Opportunities for PetroChina and Shandong Publishing

0.22

Correlation Coefficient

PetroChina  Shandong Publishing

Modest diversification

The 3 months correlation between PetroChina and Shandong is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding PetroChina Co Ltd and Shandong Publishing Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shandong Publishing Media 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 Shandong Publishing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shandong Publishing Media has no effect on the direction of PetroChina i.e., PetroChina and Shandong Publishing go up and down completely randomly.

Pair Corralation between PetroChina and Shandong Publishing

Assuming the 90 days trading horizon PetroChina Co Ltd is expected to generate 0.62 times more return on investment than Shandong Publishing. However, PetroChina Co Ltd is 1.62 times less risky than Shandong Publishing. It trades about -0.02 of its potential returns per unit of risk. Shandong Publishing Media is currently generating about -0.03 per unit of risk. If you would invest  802.00  in PetroChina Co Ltd on December 2, 2024 and sell it today you would lose (16.00) from holding PetroChina Co Ltd or give up 2.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

PetroChina Co Ltd  vs.  Shandong Publishing Media

PetroChina

Risk-Adjusted Performance

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.

Shandong Publishing Media

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shandong Publishing Media has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Shandong Publishing 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 Shandong Publishing

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

The idea behind PetroChina Co Ltd and Shandong Publishing 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.