Correlation Between PetroChina and Jiangsu Cai

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

Diversification Opportunities for PetroChina and Jiangsu Cai

-0.46

Correlation Coefficient

PetroChina  Jiangsu Cai

Very good diversification

The 3 months correlation between PetroChina and Jiangsu is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding PetroChina Co Ltd and Jiangsu Cai Qin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangsu Cai Qin 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 Jiangsu Cai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangsu Cai Qin has no effect on the direction of PetroChina i.e., PetroChina and Jiangsu Cai go up and down completely randomly.

Pair Corralation between PetroChina and Jiangsu Cai

Assuming the 90 days trading horizon PetroChina Co Ltd is expected to under-perform the Jiangsu Cai. But the stock apears to be less risky and, when comparing its historical volatility, PetroChina Co Ltd is 2.42 times less risky than Jiangsu Cai. The stock trades about -0.04 of its potential returns per unit of risk. The Jiangsu Cai Qin is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  1,812  in Jiangsu Cai Qin on October 8, 2024 and sell it today you would lose (155.00) from holding Jiangsu Cai Qin or give up 8.55% 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.  Jiangsu Cai Qin

PetroChina

Risk-Adjusted Performance

0 of 100

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.

Jiangsu Cai Qin

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind PetroChina Co Ltd and Jiangsu Cai Qin 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.