Correlation Between PetroChina and National Silicon

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

Diversification Opportunities for PetroChina and National Silicon

-0.27

Correlation Coefficient

PetroChina  National Silicon

Very good diversification

The 3 months correlation between PetroChina and National is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding PetroChina Co Ltd and National Silicon Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Silicon Industry 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 National Silicon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Silicon Industry has no effect on the direction of PetroChina i.e., PetroChina and National Silicon go up and down completely randomly.

Pair Corralation between PetroChina and National Silicon

Assuming the 90 days trading horizon PetroChina Co Ltd is expected to under-perform the National Silicon. But the stock apears to be less risky and, when comparing its historical volatility, PetroChina Co Ltd is 2.52 times less risky than National Silicon. The stock trades about -0.14 of its potential returns per unit of risk. The National Silicon Industry is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  1,943  in National Silicon Industry on December 28, 2024 and sell it today you would lose (139.00) from holding National Silicon Industry or give up 7.15% of portfolio value over 90 days.

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

PetroChina Co Ltd  vs.  National Silicon Industry

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.

National Silicon Industry

Risk-Adjusted Performance

Very Weak

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

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

The idea behind PetroChina Co Ltd and National Silicon Industry 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.