Correlation Between PetroChina and Masterwork Machinery

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

Diversification Opportunities for PetroChina and Masterwork Machinery

-0.06

Correlation Coefficient

PetroChina  Masterwork Machinery

Good diversification

The 3 months correlation between PetroChina and Masterwork is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding PetroChina Co Ltd and Masterwork Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Masterwork Machinery 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 Masterwork Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Masterwork Machinery has no effect on the direction of PetroChina i.e., PetroChina and Masterwork Machinery go up and down completely randomly.

Pair Corralation between PetroChina and Masterwork Machinery

Assuming the 90 days trading horizon PetroChina is expected to generate 27.22 times less return on investment than Masterwork Machinery. But when comparing it to its historical volatility, PetroChina Co Ltd is 2.44 times less risky than Masterwork Machinery. It trades about 0.0 of its potential returns per unit of risk. Masterwork Machinery is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  533.00  in Masterwork Machinery on September 28, 2024 and sell it today you would earn a total of  51.00  from holding Masterwork Machinery or generate 9.57% 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.  Masterwork Machinery

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.

Masterwork Machinery

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Masterwork Machinery are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Masterwork Machinery sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PetroChina and Masterwork Machinery

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

The idea behind PetroChina Co Ltd and Masterwork 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.