Correlation Between PetroChina and Vats Liquor

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

Diversification Opportunities for PetroChina and Vats Liquor

0.24

Correlation Coefficient

PetroChina  Vats Liquor

Modest diversification

The 3 months correlation between PetroChina and Vats is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding PetroChina Co Ltd and Vats Liquor Chain in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vats Liquor Chain 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 Vats Liquor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vats Liquor Chain has no effect on the direction of PetroChina i.e., PetroChina and Vats Liquor go up and down completely randomly.

Pair Corralation between PetroChina and Vats Liquor

Assuming the 90 days trading horizon PetroChina Co Ltd is expected to generate 0.42 times more return on investment than Vats Liquor. However, PetroChina Co Ltd is 2.39 times less risky than Vats Liquor. It trades about -0.03 of its potential returns per unit of risk. Vats Liquor Chain is currently generating about -0.04 per unit of risk. If you would invest  934.00  in PetroChina Co Ltd on October 1, 2024 and sell it today you would lose (42.00) from holding PetroChina Co Ltd or give up 4.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

PetroChina Co Ltd  vs.  Vats Liquor Chain

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.

Vats Liquor Chain

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vats Liquor Chain 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.

Pair Trading with PetroChina and Vats Liquor

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

The idea behind PetroChina Co Ltd and Vats Liquor Chain 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.