Correlation Between PetroChina and Pylon Technologies

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

Diversification Opportunities for PetroChina and Pylon Technologies

-0.59

Correlation Coefficient

PetroChina  Pylon Technologies

Excellent diversification

The 3 months correlation between PetroChina and Pylon is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding PetroChina Co Ltd and Pylon Technologies Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pylon Technologies 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 Pylon Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pylon Technologies has no effect on the direction of PetroChina i.e., PetroChina and Pylon Technologies go up and down completely randomly.

Pair Corralation between PetroChina and Pylon Technologies

Assuming the 90 days trading horizon PetroChina Co Ltd is expected to under-perform the Pylon Technologies. But the stock apears to be less risky and, when comparing its historical volatility, PetroChina Co Ltd is 1.96 times less risky than Pylon Technologies. The stock trades about -0.15 of its potential returns per unit of risk. The Pylon Technologies Co is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  4,265  in Pylon Technologies Co on December 26, 2024 and sell it today you would lose (182.00) from holding Pylon Technologies Co or give up 4.27% of portfolio value over 90 days.

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

PetroChina Co Ltd  vs.  Pylon Technologies Co

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 latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pylon Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pylon Technologies Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Pylon Technologies 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 Pylon Technologies

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

The idea behind PetroChina Co Ltd and Pylon Technologies 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.