Correlation Between PetroChina and Eastroc Beverage

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

Diversification Opportunities for PetroChina and Eastroc Beverage

0.74

Correlation Coefficient

PetroChina  Eastroc Beverage

Poor diversification

The 3 months correlation between PetroChina and Eastroc is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding PetroChina Co Ltd and Eastroc Beverage Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastroc Beverage 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 Eastroc Beverage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eastroc Beverage has no effect on the direction of PetroChina i.e., PetroChina and Eastroc Beverage go up and down completely randomly.

Pair Corralation between PetroChina and Eastroc Beverage

Assuming the 90 days trading horizon PetroChina Co Ltd is expected to under-perform the Eastroc Beverage. But the stock apears to be less risky and, when comparing its historical volatility, PetroChina Co Ltd is 2.3 times less risky than Eastroc Beverage. The stock trades about -0.24 of its potential returns per unit of risk. The Eastroc Beverage Group is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  24,744  in Eastroc Beverage Group on December 2, 2024 and sell it today you would lose (2,621) from holding Eastroc Beverage Group or give up 10.59% of portfolio value over 90 days.

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

PetroChina Co Ltd  vs.  Eastroc Beverage Group

PetroChina

Risk-Adjusted Performance

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.

Eastroc Beverage

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Eastroc Beverage Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Eastroc Beverage is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with PetroChina and Eastroc Beverage

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

The idea behind PetroChina Co Ltd and Eastroc Beverage Group 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.