Correlation Between Apple and PetroChina Company

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

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

Diversification Opportunities for Apple and PetroChina Company

-0.28

Correlation Coefficient

Apple  PetroChina Company

Very good diversification

The 3 months correlation between Apple and PetroChina is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and PetroChina Company Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PetroChina Limited and Apple 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 Apple Inc are associated (or correlated) with PetroChina Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PetroChina Limited has no effect on the direction of Apple i.e., Apple and PetroChina Company go up and down completely randomly.

Pair Corralation between Apple and PetroChina Company

Assuming the 90 days trading horizon Apple is expected to generate 4.05 times less return on investment than PetroChina Company. But when comparing it to its historical volatility, Apple Inc is 2.94 times less risky than PetroChina Company. It trades about 0.08 of its potential returns per unit of risk. PetroChina Company Limited is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  8.59  in PetroChina Company Limited on September 28, 2024 and sell it today you would earn a total of  64.41  from holding PetroChina Company Limited or generate 749.83% return on investment over 90 days.

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

Apple Inc  vs.  PetroChina Company Limited

Apple Inc

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, Apple unveiled solid returns over the last few months and may actually be approaching a breakup point.

PetroChina Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PetroChina Company Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, PetroChina Company is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Apple and PetroChina Company

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

The idea behind Apple Inc and PetroChina Company Limited 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.