Correlation Between PetroChina and Nanya New

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

Diversification Opportunities for PetroChina and Nanya New

-0.8

Correlation Coefficient

PetroChina  Nanya New

Pay attention - limited upside

The 3 months correlation between PetroChina and Nanya is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding PetroChina Co Ltd and Nanya New Material in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nanya New Material 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 Nanya New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nanya New Material has no effect on the direction of PetroChina i.e., PetroChina and Nanya New go up and down completely randomly.

Pair Corralation between PetroChina and Nanya New

Assuming the 90 days trading horizon PetroChina Co Ltd is expected to under-perform the Nanya New. But the stock apears to be less risky and, when comparing its historical volatility, PetroChina Co Ltd is 4.44 times less risky than Nanya New. The stock trades about -0.15 of its potential returns per unit of risk. The Nanya New Material is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  2,125  in Nanya New Material on December 26, 2024 and sell it today you would earn a total of  1,156  from holding Nanya New Material or generate 54.4% return on investment over 90 days.

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

PetroChina Co Ltd  vs.  Nanya New Material

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.

Nanya New Material

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nanya New Material are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Nanya New sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PetroChina and Nanya New

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

The idea behind PetroChina Co Ltd and Nanya New Material 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.

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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.