Correlation Between PetroChina and Shanghai OPM

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

Diversification Opportunities for PetroChina and Shanghai OPM

-0.47

Correlation Coefficient

PetroChina  Shanghai OPM

Very good diversification

The 3 months correlation between PetroChina and Shanghai is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding PetroChina Co Ltd and Shanghai OPM Biosciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai OPM Biosciences 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 Shanghai OPM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai OPM Biosciences has no effect on the direction of PetroChina i.e., PetroChina and Shanghai OPM go up and down completely randomly.

Pair Corralation between PetroChina and Shanghai OPM

Assuming the 90 days trading horizon PetroChina Co Ltd is expected to generate 0.55 times more return on investment than Shanghai OPM. However, PetroChina Co Ltd is 1.82 times less risky than Shanghai OPM. It trades about 0.03 of its potential returns per unit of risk. Shanghai OPM Biosciences is currently generating about -0.01 per unit of risk. If you would invest  766.00  in PetroChina Co Ltd on October 5, 2024 and sell it today you would earn a total of  119.00  from holding PetroChina Co Ltd or generate 15.54% return on investment over 90 days.

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

PetroChina Co Ltd  vs.  Shanghai OPM Biosciences

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.

Shanghai OPM Biosciences

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai OPM Biosciences are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Shanghai OPM 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 Shanghai OPM

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

The idea behind PetroChina Co Ltd and Shanghai OPM Biosciences 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 CEOs Directory module to screen CEOs from public companies around the world.