Correlation Between PetroChina and King Strong

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

Diversification Opportunities for PetroChina and King Strong

0.11

Correlation Coefficient

PetroChina  King Strong

Average diversification

The 3 months correlation between PetroChina and King is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding PetroChina Co Ltd and King Strong New Material in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on King Strong New 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 King Strong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of King Strong New has no effect on the direction of PetroChina i.e., PetroChina and King Strong go up and down completely randomly.

Pair Corralation between PetroChina and King Strong

Assuming the 90 days trading horizon PetroChina is expected to generate 9.63 times less return on investment than King Strong. But when comparing it to its historical volatility, PetroChina Co Ltd is 2.12 times less risky than King Strong. It trades about 0.03 of its potential returns per unit of risk. King Strong New Material is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,587  in King Strong New Material on September 24, 2024 and sell it today you would earn a total of  598.00  from holding King Strong New Material or generate 37.68% 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.  King Strong New Material

PetroChina

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PetroChina Co Ltd are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

King Strong New

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in King Strong New Material are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, King Strong sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PetroChina and King Strong

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

The idea behind PetroChina Co Ltd and King Strong New Material 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.