Correlation Between Equinor ASA and PetroChina

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

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

Diversification Opportunities for Equinor ASA and PetroChina

0.62

Correlation Coefficient

Equinor ASA  PetroChina

Poor diversification

The 3 months correlation between Equinor and PetroChina is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Equinor ASA and PetroChina Co Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PetroChina and Equinor ASA 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 Equinor ASA are associated (or correlated) with PetroChina. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PetroChina has no effect on the direction of Equinor ASA i.e., Equinor ASA and PetroChina go up and down completely randomly.

Pair Corralation between Equinor ASA and PetroChina

Assuming the 90 days horizon Equinor ASA is expected to generate 1.01 times more return on investment than PetroChina. However, Equinor ASA is 1.01 times more volatile than PetroChina Co Ltd. It trades about 0.12 of its potential returns per unit of risk. PetroChina Co Ltd is currently generating about 0.04 per unit of risk. If you would invest  2,291  in Equinor ASA on December 30, 2024 and sell it today you would earn a total of  370.00  from holding Equinor ASA or generate 16.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.77%
Values	Daily Returns

Equinor ASA  vs.  PetroChina Co Ltd

Equinor ASA

Risk-Adjusted Performance

OK

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

PetroChina

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PetroChina Co Ltd are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, PetroChina is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Equinor ASA and PetroChina

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

The idea behind Equinor ASA and PetroChina Co Ltd 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .