Correlation Between PetroChina and CITIC Guoan

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

Diversification Opportunities for PetroChina and CITIC Guoan

-0.34

Correlation Coefficient

PetroChina  CITIC Guoan

Very good diversification

The 3 months correlation between PetroChina and CITIC is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding PetroChina Co Ltd and CITIC Guoan Information in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CITIC Guoan Information 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 CITIC Guoan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CITIC Guoan Information has no effect on the direction of PetroChina i.e., PetroChina and CITIC Guoan go up and down completely randomly.

Pair Corralation between PetroChina and CITIC Guoan

Assuming the 90 days trading horizon PetroChina Co Ltd is expected to under-perform the CITIC Guoan. But the stock apears to be less risky and, when comparing its historical volatility, PetroChina Co Ltd is 1.88 times less risky than CITIC Guoan. The stock trades about -0.07 of its potential returns per unit of risk. The CITIC Guoan Information is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  219.00  in CITIC Guoan Information on September 2, 2024 and sell it today you would earn a total of  132.00  from holding CITIC Guoan Information or generate 60.27% 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.  CITIC Guoan Information

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.

CITIC Guoan Information

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CITIC Guoan Information are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, CITIC Guoan sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PetroChina and CITIC Guoan

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

The idea behind PetroChina Co Ltd and CITIC Guoan Information 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.