Correlation Between PetroChina and Gifore Agricultural

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

Diversification Opportunities for PetroChina and Gifore Agricultural

0.18

Correlation Coefficient

PetroChina  Gifore Agricultural

Average diversification

The 3 months correlation between PetroChina and Gifore is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding PetroChina Co Ltd and Gifore Agricultural Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gifore Agricultural 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 Gifore Agricultural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gifore Agricultural has no effect on the direction of PetroChina i.e., PetroChina and Gifore Agricultural go up and down completely randomly.

Pair Corralation between PetroChina and Gifore Agricultural

Assuming the 90 days trading horizon PetroChina Co Ltd is expected to generate 0.61 times more return on investment than Gifore Agricultural. However, PetroChina Co Ltd is 1.64 times less risky than Gifore Agricultural. It trades about 0.05 of its potential returns per unit of risk. Gifore Agricultural Machinery is currently generating about 0.03 per unit of risk. If you would invest  676.00  in PetroChina Co Ltd on September 13, 2024 and sell it today you would earn a total of  169.00  from holding PetroChina Co Ltd or generate 25.0% 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.  Gifore Agricultural Machinery

PetroChina

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PetroChina Co Ltd are ranked lower than 6 (%) 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.

Gifore Agricultural

Risk-Adjusted Performance

16 of 100

Good

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

Pair Trading with PetroChina and Gifore Agricultural

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

The idea behind PetroChina Co Ltd and Gifore Agricultural Machinery 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.