Correlation Between PetroChina and Nanjing OLO

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

Diversification Opportunities for PetroChina and Nanjing OLO

0.35

Correlation Coefficient

PetroChina  Nanjing OLO

Weak diversification

The 3 months correlation between PetroChina and Nanjing is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding PetroChina Co Ltd and Nanjing OLO Home in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nanjing OLO Home 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 Nanjing OLO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nanjing OLO Home has no effect on the direction of PetroChina i.e., PetroChina and Nanjing OLO go up and down completely randomly.

Pair Corralation between PetroChina and Nanjing OLO

Assuming the 90 days trading horizon PetroChina is expected to generate 2.96 times less return on investment than Nanjing OLO. But when comparing it to its historical volatility, PetroChina Co Ltd is 1.37 times less risky than Nanjing OLO. It trades about 0.09 of its potential returns per unit of risk. Nanjing OLO Home is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  516.00  in Nanjing OLO Home on September 13, 2024 and sell it today you would earn a total of  179.00  from holding Nanjing OLO Home or generate 34.69% return on investment over 90 days.

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

PetroChina Co Ltd  vs.  Nanjing OLO Home

PetroChina

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PetroChina Co Ltd are ranked lower than 6 (%) 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.

Nanjing OLO Home

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nanjing OLO Home are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Nanjing OLO sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PetroChina and Nanjing OLO

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

The idea behind PetroChina Co Ltd and Nanjing OLO Home 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..