Correlation Between PetroChina and Qi An

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

Diversification Opportunities for PetroChina and Qi An

-0.31

Correlation Coefficient

PetroChina  Qi An

Very good diversification

The 3 months correlation between PetroChina and 688561 is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding PetroChina Co Ltd and Qi An Xin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qi An Xin 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 Qi An. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qi An Xin has no effect on the direction of PetroChina i.e., PetroChina and Qi An go up and down completely randomly.

Pair Corralation between PetroChina and Qi An

Assuming the 90 days trading horizon PetroChina Co Ltd is expected to under-perform the Qi An. But the stock apears to be less risky and, when comparing its historical volatility, PetroChina Co Ltd is 1.75 times less risky than Qi An. The stock trades about -0.03 of its potential returns per unit of risk. The Qi An Xin is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  2,915  in Qi An Xin on October 9, 2024 and sell it today you would lose (469.00) from holding Qi An Xin or give up 16.09% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.45%
Values	Daily Returns

PetroChina Co Ltd  vs.  Qi An Xin

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.

Qi An Xin

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Qi An Xin has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with PetroChina and Qi An

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

The idea behind PetroChina Co Ltd and Qi An Xin 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.