Correlation Between PetroChina and Equinor ASA

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

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

Diversification Opportunities for PetroChina and Equinor ASA

0.55

Correlation Coefficient

PetroChina  Equinor ASA

Very weak diversification

The 3 months correlation between PetroChina and Equinor is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding PetroChina Co Ltd and Equinor ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equinor ASA and PetroChina 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 Co Ltd are associated (or correlated) with Equinor ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equinor ASA has no effect on the direction of PetroChina i.e., PetroChina and Equinor ASA go up and down completely randomly.

Pair Corralation between PetroChina and Equinor ASA

Assuming the 90 days horizon PetroChina Co Ltd is expected to under-perform the Equinor ASA. In addition to that, PetroChina is 1.3 times more volatile than Equinor ASA. It trades about -0.02 of its total potential returns per unit of risk. Equinor ASA is currently generating about -0.01 per unit of volatility. If you would invest  2,643  in Equinor ASA on September 5, 2024 and sell it today you would lose (225.00) from holding Equinor ASA or give up 8.51% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.4%
Values	Daily Returns

PetroChina Co Ltd  vs.  Equinor ASA

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.

Equinor ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Equinor ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical indicators, Equinor ASA is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with PetroChina and Equinor ASA

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

The idea behind PetroChina Co Ltd and Equinor ASA 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.