Correlation Between PetroChina and Guobo Electronics

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

Diversification Opportunities for PetroChina and Guobo Electronics

-0.38

Correlation Coefficient

PetroChina  Guobo Electronics

Very good diversification

The 3 months correlation between PetroChina and Guobo is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding PetroChina Co Ltd and Guobo Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guobo Electronics 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 Guobo Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guobo Electronics has no effect on the direction of PetroChina i.e., PetroChina and Guobo Electronics go up and down completely randomly.

Pair Corralation between PetroChina and Guobo Electronics

Assuming the 90 days trading horizon PetroChina Co Ltd is expected to generate 0.64 times more return on investment than Guobo Electronics. However, PetroChina Co Ltd is 1.57 times less risky than Guobo Electronics. It trades about 0.05 of its potential returns per unit of risk. Guobo Electronics Co is currently generating about 0.01 per unit of risk. If you would invest  733.00  in PetroChina Co Ltd on October 9, 2024 and sell it today you would earn a total of  151.00  from holding PetroChina Co Ltd or generate 20.6% return on investment over 90 days.

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

PetroChina Co Ltd  vs.  Guobo Electronics Co

PetroChina

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PetroChina Co Ltd are ranked lower than 4 (%) 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.

Guobo Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind PetroChina Co Ltd and Guobo Electronics 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.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.