Correlation Between PetroChina Company and Chevron

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

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

Diversification Opportunities for PetroChina Company and Chevron

-0.65

Correlation Coefficient

PetroChina Company  Chevron

Excellent diversification

The 3 months correlation between PetroChina and Chevron is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding PetroChina Company Limited and Chevron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chevron and PetroChina Company 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 PetroChina Company Limited are associated (or correlated) with Chevron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chevron has no effect on the direction of PetroChina Company i.e., PetroChina Company and Chevron go up and down completely randomly.

Pair Corralation between PetroChina Company and Chevron

Assuming the 90 days horizon PetroChina Company is expected to generate 10.15 times less return on investment than Chevron. In addition to that, PetroChina Company is 1.77 times more volatile than Chevron. It trades about 0.0 of its total potential returns per unit of risk. Chevron is currently generating about 0.07 per unit of volatility. If you would invest  13,059  in Chevron on September 30, 2024 and sell it today you would earn a total of  791.00  from holding Chevron or generate 6.06% return on investment over 90 days.

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

PetroChina Company Limited  vs.  Chevron

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.

Chevron

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Chevron are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Chevron may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with PetroChina Company and Chevron

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

The idea behind PetroChina Company Limited and Chevron 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.