Correlation Between PetroChina and JuneYao Dairy

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

Diversification Opportunities for PetroChina and JuneYao Dairy

0.16

Correlation Coefficient

PetroChina  JuneYao Dairy

Average diversification

The 3 months correlation between PetroChina and JuneYao is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding PetroChina Co Ltd and JuneYao Dairy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JuneYao Dairy 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 JuneYao Dairy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JuneYao Dairy has no effect on the direction of PetroChina i.e., PetroChina and JuneYao Dairy go up and down completely randomly.

Pair Corralation between PetroChina and JuneYao Dairy

Assuming the 90 days trading horizon PetroChina is expected to generate 5.09 times less return on investment than JuneYao Dairy. But when comparing it to its historical volatility, PetroChina Co Ltd is 1.71 times less risky than JuneYao Dairy. It trades about 0.09 of its potential returns per unit of risk. JuneYao Dairy Co is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  445.00  in JuneYao Dairy Co on September 13, 2024 and sell it today you would earn a total of  300.00  from holding JuneYao Dairy Co or generate 67.42% 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.  JuneYao Dairy Co

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.

JuneYao Dairy

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in JuneYao Dairy Co are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, JuneYao Dairy sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PetroChina and JuneYao Dairy

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

The idea behind PetroChina Co Ltd and JuneYao Dairy Co 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.