Correlation Between Lutian Machinery and PetroChina

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

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

Diversification Opportunities for Lutian Machinery and PetroChina

-0.6

Correlation Coefficient

Lutian Machinery  PetroChina

Excellent diversification

The 3 months correlation between Lutian and PetroChina is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Lutian Machinery Co and PetroChina Co Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PetroChina and Lutian Machinery 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 Lutian Machinery Co 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 Lutian Machinery i.e., Lutian Machinery and PetroChina go up and down completely randomly.

Pair Corralation between Lutian Machinery and PetroChina

Assuming the 90 days trading horizon Lutian Machinery Co is expected to generate 1.06 times more return on investment than PetroChina. However, Lutian Machinery is 1.06 times more volatile than PetroChina Co Ltd. It trades about 0.07 of its potential returns per unit of risk. PetroChina Co Ltd is currently generating about -0.03 per unit of risk. If you would invest  1,563  in Lutian Machinery Co on November 29, 2024 and sell it today you would earn a total of  93.00  from holding Lutian Machinery Co or generate 5.95% return on investment over 90 days.

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

Lutian Machinery Co  vs.  PetroChina Co Ltd

Lutian Machinery

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lutian Machinery Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Lutian Machinery may actually be approaching a critical reversion point that can send shares even higher in March 2025.

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.

Pair Trading with Lutian Machinery and PetroChina

The main advantage of trading using opposite Lutian Machinery and PetroChina positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lutian Machinery 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 Lutian Machinery Co 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.