Correlation Between PetroChina and Hunan Mendale

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

Diversification Opportunities for PetroChina and Hunan Mendale

-0.3

Correlation Coefficient

PetroChina  Hunan Mendale

Very good diversification

The 3 months correlation between PetroChina and Hunan is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding PetroChina Co Ltd and Hunan Mendale Hometextile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hunan Mendale Hometextile 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 Hunan Mendale. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hunan Mendale Hometextile has no effect on the direction of PetroChina i.e., PetroChina and Hunan Mendale go up and down completely randomly.

Pair Corralation between PetroChina and Hunan Mendale

Assuming the 90 days trading horizon PetroChina Co Ltd is expected to generate 0.64 times more return on investment than Hunan Mendale. However, PetroChina Co Ltd is 1.56 times less risky than Hunan Mendale. It trades about 0.04 of its potential returns per unit of risk. Hunan Mendale Hometextile is currently generating about 0.0 per unit of risk. If you would invest  686.00  in PetroChina Co Ltd on September 4, 2024 and sell it today you would earn a total of  124.00  from holding PetroChina Co Ltd or generate 18.08% 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.  Hunan Mendale Hometextile

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.

Hunan Mendale Hometextile

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hunan Mendale Hometextile are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hunan Mendale sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PetroChina and Hunan Mendale

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

The idea behind PetroChina Co Ltd and Hunan Mendale Hometextile 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.