Correlation Between PetroChina and Jiangsu Xinri

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

Diversification Opportunities for PetroChina and Jiangsu Xinri

0.38

Correlation Coefficient

PetroChina  Jiangsu Xinri

Weak diversification

The 3 months correlation between PetroChina and Jiangsu is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding PetroChina Co Ltd and Jiangsu Xinri E Vehicle in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangsu Xinri E 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 Jiangsu Xinri. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangsu Xinri E has no effect on the direction of PetroChina i.e., PetroChina and Jiangsu Xinri go up and down completely randomly.

Pair Corralation between PetroChina and Jiangsu Xinri

Assuming the 90 days trading horizon PetroChina Co Ltd is expected to under-perform the Jiangsu Xinri. But the stock apears to be less risky and, when comparing its historical volatility, PetroChina Co Ltd is 1.26 times less risky than Jiangsu Xinri. The stock trades about -0.05 of its potential returns per unit of risk. The Jiangsu Xinri E Vehicle is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,131  in Jiangsu Xinri E Vehicle on September 12, 2024 and sell it today you would earn a total of  19.00  from holding Jiangsu Xinri E Vehicle or generate 1.68% 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.  Jiangsu Xinri E Vehicle

PetroChina

Risk-Adjusted Performance

4 of 100

Modest

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.

Jiangsu Xinri E

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Jiangsu Xinri E Vehicle are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jiangsu Xinri sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PetroChina and Jiangsu Xinri

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

The idea behind PetroChina Co Ltd and Jiangsu Xinri E Vehicle 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.