Correlation Between PetroChina and Shanghai Lingyun

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

Diversification Opportunities for PetroChina and Shanghai Lingyun

-0.18

Correlation Coefficient

PetroChina  Shanghai Lingyun

Good diversification

The 3 months correlation between PetroChina and Shanghai is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding PetroChina Co Ltd and Shanghai Lingyun Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Lingyun Ind 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 Lingyun. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Lingyun Ind has no effect on the direction of PetroChina i.e., PetroChina and Shanghai Lingyun go up and down completely randomly.

Pair Corralation between PetroChina and Shanghai Lingyun

Assuming the 90 days trading horizon PetroChina Co Ltd is expected to generate 0.45 times more return on investment than Shanghai Lingyun. However, PetroChina Co Ltd is 2.22 times less risky than Shanghai Lingyun. It trades about -0.02 of its potential returns per unit of risk. Shanghai Lingyun Industries is currently generating about -0.17 per unit of risk. If you would invest  802.00  in PetroChina Co Ltd on December 1, 2024 and sell it today you would lose (16.00) from holding PetroChina Co Ltd or give up 2.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.31%
Values	Daily Returns

PetroChina Co Ltd  vs.  Shanghai Lingyun Industries

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 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 Lingyun Ind

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shanghai Lingyun Industries 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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with PetroChina and Shanghai Lingyun

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

The idea behind PetroChina Co Ltd and Shanghai Lingyun Industries 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.