Correlation Between Guangdong Liantai and PetroChina

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

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

Diversification Opportunities for Guangdong Liantai and PetroChina

-0.22

Correlation Coefficient

Guangdong Liantai  PetroChina

Very good diversification

The 3 months correlation between Guangdong and PetroChina is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Liantai Environmenta and PetroChina Co Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PetroChina and Guangdong Liantai 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 Guangdong Liantai Environmental 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 Guangdong Liantai i.e., Guangdong Liantai and PetroChina go up and down completely randomly.

Pair Corralation between Guangdong Liantai and PetroChina

Assuming the 90 days trading horizon Guangdong Liantai Environmental is expected to under-perform the PetroChina. But the stock apears to be less risky and, when comparing its historical volatility, Guangdong Liantai Environmental is 1.01 times less risky than PetroChina. The stock trades about -0.02 of its potential returns per unit of risk. The PetroChina Co Ltd is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  495.00  in PetroChina Co Ltd on September 1, 2024 and sell it today you would earn a total of  309.00  from holding PetroChina Co Ltd or generate 62.42% return on investment over 90 days.

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

Guangdong Liantai Environmenta  vs.  PetroChina Co Ltd

Guangdong Liantai

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Guangdong Liantai Environmental are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangdong Liantai sustained solid returns over the last few months and may actually be approaching a breakup point.

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 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.

Pair Trading with Guangdong Liantai and PetroChina

The main advantage of trading using opposite Guangdong Liantai and PetroChina positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guangdong Liantai 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 Guangdong Liantai Environmental 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.