Correlation Between GMO Internet and PetroChina Company

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

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

Diversification Opportunities for GMO Internet and PetroChina Company

-0.09

Correlation Coefficient

GMO Internet  PetroChina Company

Good diversification

The 3 months correlation between GMO and PetroChina is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding GMO Internet and PetroChina Company Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PetroChina Limited and GMO Internet 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 GMO Internet 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 GMO Internet i.e., GMO Internet and PetroChina Company go up and down completely randomly.

Pair Corralation between GMO Internet and PetroChina Company

Assuming the 90 days horizon GMO Internet is expected to generate 9.94 times less return on investment than PetroChina Company. But when comparing it to its historical volatility, GMO Internet is 1.49 times less risky than PetroChina Company. It trades about 0.04 of its potential returns per unit of risk. PetroChina Company Limited is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  72.00  in PetroChina Company Limited on October 22, 2024 and sell it today you would earn a total of  5.00  from holding PetroChina Company Limited or generate 6.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.12%
Values	Daily Returns

GMO Internet  vs.  PetroChina Company Limited

GMO Internet

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in GMO Internet are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, GMO Internet is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

PetroChina Limited

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PetroChina Company Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, PetroChina Company may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with GMO Internet and PetroChina Company

The main advantage of trading using opposite GMO Internet and PetroChina Company positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GMO Internet 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 GMO Internet 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.