Correlation Between Equinor ASA and PetroChina

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

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

Diversification Opportunities for Equinor ASA and PetroChina

0.55

Correlation Coefficient

Equinor ASA  PetroChina

Very weak diversification

The 3 months correlation between Equinor and PetroChina is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Equinor ASA ADR and PetroChina Co Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PetroChina and Equinor ASA 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 Equinor ASA ADR 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 Equinor ASA i.e., Equinor ASA and PetroChina go up and down completely randomly.

Pair Corralation between Equinor ASA and PetroChina

Given the investment horizon of 90 days Equinor ASA ADR is expected to generate 0.49 times more return on investment than PetroChina. However, Equinor ASA ADR is 2.06 times less risky than PetroChina. It trades about 0.01 of its potential returns per unit of risk. PetroChina Co Ltd is currently generating about -0.02 per unit of risk. If you would invest  2,470  in Equinor ASA ADR on September 5, 2024 and sell it today you would lose (13.00) from holding Equinor ASA ADR or give up 0.53% of portfolio value over 90 days.

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

Equinor ASA ADR  vs.  PetroChina Co Ltd

Equinor ASA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Equinor ASA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Equinor ASA is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

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 nearly stable basic indicators, PetroChina is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Equinor ASA and PetroChina

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

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.