Correlation Between PetroChina and Western Superconducting

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

Diversification Opportunities for PetroChina and Western Superconducting

0.34

Correlation Coefficient

PetroChina  Western Superconducting

Weak diversification

The 3 months correlation between PetroChina and Western is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding PetroChina Co Ltd and Western Superconducting Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Superconducting 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 Western Superconducting. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Superconducting has no effect on the direction of PetroChina i.e., PetroChina and Western Superconducting go up and down completely randomly.

Pair Corralation between PetroChina and Western Superconducting

Assuming the 90 days trading horizon PetroChina Co Ltd is expected to generate 1.0 times more return on investment than Western Superconducting. However, PetroChina Co Ltd is 1.0 times less risky than Western Superconducting. It trades about 0.28 of its potential returns per unit of risk. Western Superconducting Tech is currently generating about -0.09 per unit of risk. If you would invest  803.00  in PetroChina Co Ltd on September 25, 2024 and sell it today you would earn a total of  75.00  from holding PetroChina Co Ltd or generate 9.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

PetroChina Co Ltd  vs.  Western Superconducting Tech

PetroChina

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PetroChina Co Ltd are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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.

Western Superconducting

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Western Superconducting Tech are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Western Superconducting sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PetroChina and Western Superconducting

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

The idea behind PetroChina Co Ltd and Western Superconducting Tech 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.