Correlation Between PetroChina and Healthcare

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

Diversification Opportunities for PetroChina and Healthcare

0.03

Correlation Coefficient

PetroChina  Healthcare

Significant diversification

The 3 months correlation between PetroChina and Healthcare is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding PetroChina Co Ltd and Healthcare Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Healthcare 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 Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Healthcare has no effect on the direction of PetroChina i.e., PetroChina and Healthcare go up and down completely randomly.

Pair Corralation between PetroChina and Healthcare

Assuming the 90 days trading horizon PetroChina Co Ltd is expected to under-perform the Healthcare. But the stock apears to be less risky and, when comparing its historical volatility, PetroChina Co Ltd is 1.43 times less risky than Healthcare. The stock trades about -0.05 of its potential returns per unit of risk. The Healthcare Co is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  593.00  in Healthcare Co on September 3, 2024 and sell it today you would earn a total of  146.00  from holding Healthcare Co or generate 24.62% 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.  Healthcare 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.

Healthcare

Risk-Adjusted Performance

10 of 100

OK

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

Pair Trading with PetroChina and Healthcare

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

The idea behind PetroChina Co Ltd and Healthcare 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.

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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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..