Correlation Between PetroChina and Hainan Haiqi

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

Diversification Opportunities for PetroChina and Hainan Haiqi

-0.03

Correlation Coefficient

PetroChina  Hainan Haiqi

Good diversification

The 3 months correlation between PetroChina and Hainan is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding PetroChina Co Ltd and Hainan Haiqi Transportation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hainan Haiqi Transpo 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 Hainan Haiqi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hainan Haiqi Transpo has no effect on the direction of PetroChina i.e., PetroChina and Hainan Haiqi go up and down completely randomly.

Pair Corralation between PetroChina and Hainan Haiqi

Assuming the 90 days trading horizon PetroChina is expected to generate 3.86 times less return on investment than Hainan Haiqi. But when comparing it to its historical volatility, PetroChina Co Ltd is 1.5 times less risky than Hainan Haiqi. It trades about 0.06 of its potential returns per unit of risk. Hainan Haiqi Transportation is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1,557  in Hainan Haiqi Transportation on September 12, 2024 and sell it today you would earn a total of  483.00  from holding Hainan Haiqi Transportation or generate 31.02% 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.  Hainan Haiqi Transportation

PetroChina

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PetroChina Co Ltd are ranked lower than 4 (%) 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.

Hainan Haiqi Transpo

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hainan Haiqi Transportation are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hainan Haiqi sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PetroChina and Hainan Haiqi

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

The idea behind PetroChina Co Ltd and Hainan Haiqi Transportation 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.