Correlation Between PetroChina and Zhengzhou Coal

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

Diversification Opportunities for PetroChina and Zhengzhou Coal

0.13

Correlation Coefficient

PetroChina  Zhengzhou Coal

Average diversification

The 3 months correlation between PetroChina and Zhengzhou is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding PetroChina Co Ltd and Zhengzhou Coal Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhengzhou Coal Mining 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 Zhengzhou Coal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhengzhou Coal Mining has no effect on the direction of PetroChina i.e., PetroChina and Zhengzhou Coal go up and down completely randomly.

Pair Corralation between PetroChina and Zhengzhou Coal

Assuming the 90 days trading horizon PetroChina Co Ltd is expected to under-perform the Zhengzhou Coal. But the stock apears to be less risky and, when comparing its historical volatility, PetroChina Co Ltd is 1.12 times less risky than Zhengzhou Coal. The stock trades about 0.0 of its potential returns per unit of risk. The Zhengzhou Coal Mining is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,156  in Zhengzhou Coal Mining on September 4, 2024 and sell it today you would earn a total of  108.00  from holding Zhengzhou Coal Mining or generate 9.34% return on investment over 90 days.

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

PetroChina Co Ltd  vs.  Zhengzhou Coal Mining

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.

Zhengzhou Coal Mining

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Zhengzhou Coal Mining are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhengzhou Coal may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with PetroChina and Zhengzhou Coal

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

The idea behind PetroChina Co Ltd and Zhengzhou Coal Mining 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.