Correlation Between Runjian Communication and PetroChina

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

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

Diversification Opportunities for Runjian Communication and PetroChina

0.61

Correlation Coefficient

Runjian Communication  PetroChina

Poor diversification

The 3 months correlation between Runjian and PetroChina is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Runjian Communication Co and PetroChina Co Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PetroChina and Runjian Communication 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 Runjian Communication Co 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 Runjian Communication i.e., Runjian Communication and PetroChina go up and down completely randomly.

Pair Corralation between Runjian Communication and PetroChina

Assuming the 90 days trading horizon Runjian Communication Co is expected to generate 1.47 times more return on investment than PetroChina. However, Runjian Communication is 1.47 times more volatile than PetroChina Co Ltd. It trades about 0.14 of its potential returns per unit of risk. PetroChina Co Ltd is currently generating about 0.07 per unit of risk. If you would invest  2,392  in Runjian Communication Co on September 18, 2024 and sell it today you would earn a total of  649.00  from holding Runjian Communication Co or generate 27.13% return on investment over 90 days.

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

Runjian Communication Co  vs.  PetroChina Co Ltd

Runjian Communication

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Runjian Communication Co are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Runjian Communication sustained solid returns over the last few months and may actually be approaching a breakup point.

PetroChina

Risk-Adjusted Performance

5 of 100

Modest

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

Pair Trading with Runjian Communication and PetroChina

The main advantage of trading using opposite Runjian Communication and PetroChina positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Runjian Communication 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 Runjian Communication Co 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.

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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.