Correlation Between PetroChina Company and Imperial Oil

Can any of the company-specific risk be diversified away by investing in both PetroChina Company and Imperial Oil 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 Imperial Oil 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 Imperial Oil Limited, you can compare the effects of market volatilities on PetroChina Company and Imperial Oil 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 Imperial Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of PetroChina Company and Imperial Oil.

Diversification Opportunities for PetroChina Company and Imperial Oil

-0.29

Correlation Coefficient

PetroChina Company  Imperial Oil

Very good diversification

The 3 months correlation between PetroChina and Imperial is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding PetroChina Company Limited and Imperial Oil Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Imperial Oil Limited 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 Imperial Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Imperial Oil Limited has no effect on the direction of PetroChina Company i.e., PetroChina Company and Imperial Oil go up and down completely randomly.

Pair Corralation between PetroChina Company and Imperial Oil

Assuming the 90 days horizon PetroChina Company Limited is expected to generate 0.99 times more return on investment than Imperial Oil. However, PetroChina Company Limited is 1.01 times less risky than Imperial Oil. It trades about 0.04 of its potential returns per unit of risk. Imperial Oil Limited is currently generating about -0.12 per unit of risk. If you would invest  74.00  in PetroChina Company Limited on October 8, 2024 and sell it today you would earn a total of  3.00  from holding PetroChina Company Limited or generate 4.05% return on investment over 90 days.

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

PetroChina Company Limited  vs.  Imperial Oil Limited

PetroChina Limited

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PetroChina Company Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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.

Imperial Oil Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Imperial Oil Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with PetroChina Company and Imperial Oil

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

The idea behind PetroChina Company Limited and Imperial Oil 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.