Correlation Between PetroChina Company and National Fuel

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

Diversification Opportunities for PetroChina Company and National Fuel

-0.14

Correlation Coefficient

PetroChina Company  National Fuel

Good diversification

The 3 months correlation between PetroChina and National is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding PetroChina Company Limited and National Fuel Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Fuel Gas 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 National Fuel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Fuel Gas has no effect on the direction of PetroChina Company i.e., PetroChina Company and National Fuel go up and down completely randomly.

Pair Corralation between PetroChina Company and National Fuel

Assuming the 90 days horizon PetroChina Company Limited is expected to generate 1.01 times more return on investment than National Fuel. However, PetroChina Company is 1.01 times more volatile than National Fuel Gas. It trades about 0.26 of its potential returns per unit of risk. National Fuel Gas is currently generating about 0.16 per unit of risk. If you would invest  71.00  in PetroChina Company Limited on October 9, 2024 and sell it today you would earn a total of  5.00  from holding PetroChina Company Limited or generate 7.04% return on investment over 90 days.

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

PetroChina Company Limited  vs.  National Fuel Gas

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.

National Fuel Gas

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in National Fuel Gas are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, National Fuel reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PetroChina Company and National Fuel

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

The idea behind PetroChina Company Limited and National Fuel Gas 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.