Correlation Between Zhejiang Publishing and PetroChina

Can any of the company-specific risk be diversified away by investing in both Zhejiang Publishing and PetroChina 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 Zhejiang Publishing and PetroChina into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Zhejiang Publishing Media and PetroChina Co Ltd, you can compare the effects of market volatilities on Zhejiang Publishing and PetroChina 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 Zhejiang Publishing with a short position of PetroChina. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhejiang Publishing and PetroChina.

Diversification Opportunities for Zhejiang Publishing and PetroChina

0.62

Correlation Coefficient

Zhejiang Publishing  PetroChina

Poor diversification

The 3 months correlation between Zhejiang and PetroChina is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Zhejiang Publishing Media and PetroChina Co Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PetroChina and Zhejiang Publishing 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 Zhejiang Publishing Media are associated (or correlated) with PetroChina. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PetroChina has no effect on the direction of Zhejiang Publishing i.e., Zhejiang Publishing and PetroChina go up and down completely randomly.

Pair Corralation between Zhejiang Publishing and PetroChina

Assuming the 90 days trading horizon Zhejiang Publishing is expected to generate 7.06 times less return on investment than PetroChina. In addition to that, Zhejiang Publishing is 1.37 times more volatile than PetroChina Co Ltd. It trades about 0.03 of its total potential returns per unit of risk. PetroChina Co Ltd is currently generating about 0.33 per unit of volatility. If you would invest  803.00  in PetroChina Co Ltd on September 28, 2024 and sell it today you would earn a total of  94.00  from holding PetroChina Co Ltd or generate 11.71% return on investment over 90 days.

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

Zhejiang Publishing Media  vs.  PetroChina Co Ltd

Zhejiang Publishing Media

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zhejiang Publishing Media 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.

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.

Pair Trading with Zhejiang Publishing and PetroChina

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

The idea behind Zhejiang Publishing Media and PetroChina Co Ltd 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.