Correlation Between PetroChina and Industrial Bank

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

Diversification Opportunities for PetroChina and Industrial Bank

0.21

Correlation Coefficient

PetroChina  Industrial Bank

Modest diversification

The 3 months correlation between PetroChina and Industrial is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding PetroChina Co Ltd and Industrial Bank Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrial Bank 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 Industrial Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrial Bank has no effect on the direction of PetroChina i.e., PetroChina and Industrial Bank go up and down completely randomly.

Pair Corralation between PetroChina and Industrial Bank

Assuming the 90 days trading horizon PetroChina Co Ltd is expected to under-perform the Industrial Bank. In addition to that, PetroChina is 1.11 times more volatile than Industrial Bank Co. It trades about -0.07 of its total potential returns per unit of risk. Industrial Bank Co is currently generating about 0.08 per unit of volatility. If you would invest  1,651  in Industrial Bank Co on August 30, 2024 and sell it today you would earn a total of  152.00  from holding Industrial Bank Co or generate 9.21% return on investment over 90 days.

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

PetroChina Co Ltd  vs.  Industrial Bank Co

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.

Industrial Bank

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial Bank Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Industrial Bank may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with PetroChina and Industrial Bank

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

The idea behind PetroChina Co Ltd and Industrial Bank Co 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.