Correlation Between PetroChina and Shenzhen Centralcon

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

Diversification Opportunities for PetroChina and Shenzhen Centralcon

0.26

Correlation Coefficient

PetroChina  Shenzhen Centralcon

Modest diversification

The 3 months correlation between PetroChina and Shenzhen is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding PetroChina Co Ltd and Shenzhen Centralcon Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Centralcon 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 Shenzhen Centralcon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Centralcon has no effect on the direction of PetroChina i.e., PetroChina and Shenzhen Centralcon go up and down completely randomly.

Pair Corralation between PetroChina and Shenzhen Centralcon

Assuming the 90 days trading horizon PetroChina Co Ltd is expected to generate 0.52 times more return on investment than Shenzhen Centralcon. However, PetroChina Co Ltd is 1.91 times less risky than Shenzhen Centralcon. It trades about 0.28 of its potential returns per unit of risk. Shenzhen Centralcon Investment is currently generating about 0.08 per unit of risk. If you would invest  803.00  in PetroChina Co Ltd on September 26, 2024 and sell it today you would earn a total of  75.00  from holding PetroChina Co Ltd or generate 9.34% return on investment over 90 days.

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

PetroChina Co Ltd  vs.  Shenzhen Centralcon Investment

PetroChina

Risk-Adjusted Performance

3 of 100

Weak

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 somewhat weak basic indicators, PetroChina may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Shenzhen Centralcon

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Centralcon Investment are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen Centralcon sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PetroChina and Shenzhen Centralcon

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

The idea behind PetroChina Co Ltd and Shenzhen Centralcon Investment 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.