Correlation Between PetroChina and Guangzhou Boji

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

Diversification Opportunities for PetroChina and Guangzhou Boji

-0.15

Correlation Coefficient

PetroChina  Guangzhou Boji

Good diversification

The 3 months correlation between PetroChina and Guangzhou is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding PetroChina Co Ltd and Guangzhou Boji Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou Boji Medical 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 Guangzhou Boji. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangzhou Boji Medical has no effect on the direction of PetroChina i.e., PetroChina and Guangzhou Boji go up and down completely randomly.

Pair Corralation between PetroChina and Guangzhou Boji

Assuming the 90 days trading horizon PetroChina Co Ltd is expected to generate 0.37 times more return on investment than Guangzhou Boji. However, PetroChina Co Ltd is 2.7 times less risky than Guangzhou Boji. It trades about -0.04 of its potential returns per unit of risk. Guangzhou Boji Medical is currently generating about -0.03 per unit of risk. If you would invest  811.00  in PetroChina Co Ltd on August 31, 2024 and sell it today you would lose (8.00) from holding PetroChina Co Ltd or give up 0.99% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

PetroChina Co Ltd  vs.  Guangzhou Boji Medical

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.

Guangzhou Boji Medical

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Guangzhou Boji Medical are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangzhou Boji sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PetroChina and Guangzhou Boji

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

The idea behind PetroChina Co Ltd and Guangzhou Boji Medical 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 Global Correlations module to find global opportunities by holding instruments from different markets.