Correlation Between PetroChina and Renrenle Commercial

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

Diversification Opportunities for PetroChina and Renrenle Commercial

0.01

Correlation Coefficient

PetroChina  Renrenle Commercial

Significant diversification

The 3 months correlation between PetroChina and Renrenle is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding PetroChina Co Ltd and Renrenle Commercial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Renrenle Commercial 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 Renrenle Commercial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Renrenle Commercial has no effect on the direction of PetroChina i.e., PetroChina and Renrenle Commercial go up and down completely randomly.

Pair Corralation between PetroChina and Renrenle Commercial

Assuming the 90 days trading horizon PetroChina is expected to generate 4203.67 times less return on investment than Renrenle Commercial. But when comparing it to its historical volatility, PetroChina Co Ltd is 1.89 times less risky than Renrenle Commercial. It trades about 0.0 of its potential returns per unit of risk. Renrenle Commercial Group is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest  314.00  in Renrenle Commercial Group on September 28, 2024 and sell it today you would earn a total of  319.00  from holding Renrenle Commercial Group or generate 101.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

PetroChina Co Ltd  vs.  Renrenle Commercial Group

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.

Renrenle Commercial

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Renrenle Commercial Group are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Renrenle Commercial sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PetroChina and Renrenle Commercial

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

The idea behind PetroChina Co Ltd and Renrenle Commercial Group 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.