Correlation Between Tonghua Grape and PetroChina

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

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

Diversification Opportunities for Tonghua Grape and PetroChina

-0.43

Correlation Coefficient

Tonghua Grape  PetroChina

Very good diversification

The 3 months correlation between Tonghua and PetroChina is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Tonghua Grape Wine and PetroChina Co Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PetroChina and Tonghua Grape 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 Tonghua Grape Wine 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 Tonghua Grape i.e., Tonghua Grape and PetroChina go up and down completely randomly.

Pair Corralation between Tonghua Grape and PetroChina

Assuming the 90 days trading horizon Tonghua Grape Wine is expected to generate 1.19 times more return on investment than PetroChina. However, Tonghua Grape is 1.19 times more volatile than PetroChina Co Ltd. It trades about 0.1 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  254.00  in Tonghua Grape Wine on September 1, 2024 and sell it today you would earn a total of  37.00  from holding Tonghua Grape Wine or generate 14.57% return on investment over 90 days.

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

Tonghua Grape Wine  vs.  PetroChina Co Ltd

Tonghua Grape Wine

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tonghua Grape Wine are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tonghua Grape sustained solid returns over the last few months and may actually be approaching a breakup point.

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 latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Tonghua Grape and PetroChina

The main advantage of trading using opposite Tonghua Grape and PetroChina positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tonghua Grape 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 Tonghua Grape Wine 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.