Correlation Between PetroChina and Jiugui Liquor

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

Diversification Opportunities for PetroChina and Jiugui Liquor

0.08

Correlation Coefficient

PetroChina  Jiugui Liquor

Significant diversification

The 3 months correlation between PetroChina and Jiugui is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding PetroChina Co Ltd and Jiugui Liquor Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiugui Liquor 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 Jiugui Liquor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiugui Liquor has no effect on the direction of PetroChina i.e., PetroChina and Jiugui Liquor go up and down completely randomly.

Pair Corralation between PetroChina and Jiugui Liquor

Assuming the 90 days trading horizon PetroChina is expected to generate 7.28 times less return on investment than Jiugui Liquor. But when comparing it to its historical volatility, PetroChina Co Ltd is 1.9 times less risky than Jiugui Liquor. It trades about 0.06 of its potential returns per unit of risk. Jiugui Liquor Co is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  3,522  in Jiugui Liquor Co on September 12, 2024 and sell it today you would earn a total of  2,389  from holding Jiugui Liquor Co or generate 67.83% return on investment over 90 days.

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

PetroChina Co Ltd  vs.  Jiugui Liquor Co

PetroChina

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PetroChina Co Ltd are ranked lower than 4 (%) 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.

Jiugui Liquor

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Jiugui Liquor Co are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jiugui Liquor sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PetroChina and Jiugui Liquor

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

The idea behind PetroChina Co Ltd and Jiugui Liquor Co 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.