Correlation Between GreenTech Environmental and PetroChina

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

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

Diversification Opportunities for GreenTech Environmental and PetroChina

-0.86

Correlation Coefficient

GreenTech Environmental  PetroChina

Pay attention - limited upside

The 3 months correlation between GreenTech and PetroChina is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding GreenTech Environmental Co and PetroChina Co Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PetroChina and GreenTech Environmental 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 GreenTech Environmental 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 GreenTech Environmental i.e., GreenTech Environmental and PetroChina go up and down completely randomly.

Pair Corralation between GreenTech Environmental and PetroChina

Assuming the 90 days trading horizon GreenTech Environmental Co is expected to generate 2.52 times more return on investment than PetroChina. However, GreenTech Environmental is 2.52 times more volatile than PetroChina Co Ltd. It trades about 0.14 of its potential returns per unit of risk. PetroChina Co Ltd is currently generating about -0.14 per unit of risk. If you would invest  1,394  in GreenTech Environmental Co on December 28, 2024 and sell it today you would earn a total of  330.00  from holding GreenTech Environmental Co or generate 23.67% return on investment over 90 days.

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

GreenTech Environmental Co  vs.  PetroChina Co Ltd

GreenTech Environmental

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GreenTech Environmental Co are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, GreenTech Environmental sustained solid returns over the last few months and may actually be approaching a breakup point.

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 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 GreenTech Environmental and PetroChina

The main advantage of trading using opposite GreenTech Environmental and PetroChina positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GreenTech Environmental 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 GreenTech Environmental 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.