Correlation Between Chevron and PetroChina Company

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

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

Diversification Opportunities for Chevron and PetroChina Company

-0.67

Correlation Coefficient

Chevron  PetroChina Company

Excellent diversification

The 3 months correlation between Chevron and PetroChina is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Chevron and PetroChina Company Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PetroChina Limited and Chevron 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 Chevron 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 Chevron i.e., Chevron and PetroChina Company go up and down completely randomly.

Pair Corralation between Chevron and PetroChina Company

Assuming the 90 days trading horizon Chevron is expected to generate 0.59 times more return on investment than PetroChina Company. However, Chevron is 1.69 times less risky than PetroChina Company. It trades about 0.07 of its potential returns per unit of risk. PetroChina Company Limited is currently generating about -0.04 per unit of risk. If you would invest  13,663  in Chevron on October 5, 2024 and sell it today you would earn a total of  723.00  from holding Chevron or generate 5.29% return on investment over 90 days.

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

Chevron  vs.  PetroChina Company Limited

Chevron

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days Chevron has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Chevron is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

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 Chevron and PetroChina Company

The main advantage of trading using opposite Chevron and PetroChina Company positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chevron 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 Chevron 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.

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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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.