Correlation Between PetroChina and Financial Street

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

Diversification Opportunities for PetroChina and Financial Street

-0.13

Correlation Coefficient

PetroChina  Financial Street

Good diversification

The 3 months correlation between PetroChina and Financial is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding PetroChina Co Ltd and Financial Street Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Financial Street Holdings 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 Financial Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Financial Street Holdings has no effect on the direction of PetroChina i.e., PetroChina and Financial Street go up and down completely randomly.

Pair Corralation between PetroChina and Financial Street

Assuming the 90 days trading horizon PetroChina is expected to generate 342.33 times less return on investment than Financial Street. But when comparing it to its historical volatility, PetroChina Co Ltd is 2.32 times less risky than Financial Street. It trades about 0.0 of its potential returns per unit of risk. Financial Street Holdings is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  350.00  in Financial Street Holdings on September 29, 2024 and sell it today you would earn a total of  1.00  from holding Financial Street Holdings or generate 0.29% return on investment over 90 days.

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

PetroChina Co Ltd  vs.  Financial Street Holdings

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 somewhat strong basic indicators, PetroChina is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Financial Street Holdings

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Financial Street Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Financial Street may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with PetroChina and Financial Street

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

The idea behind PetroChina Co Ltd and Financial Street Holdings 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.