Correlation Between PetroChina and Suzhou Weizhixiang

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

Diversification Opportunities for PetroChina and Suzhou Weizhixiang

0.05

Correlation Coefficient

PetroChina  Suzhou Weizhixiang

Significant diversification

The 3 months correlation between PetroChina and Suzhou is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding PetroChina Co Ltd and Suzhou Weizhixiang Food in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Suzhou Weizhixiang Food 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 Suzhou Weizhixiang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Suzhou Weizhixiang Food has no effect on the direction of PetroChina i.e., PetroChina and Suzhou Weizhixiang go up and down completely randomly.

Pair Corralation between PetroChina and Suzhou Weizhixiang

Assuming the 90 days trading horizon PetroChina Co Ltd is expected to generate 0.72 times more return on investment than Suzhou Weizhixiang. However, PetroChina Co Ltd is 1.39 times less risky than Suzhou Weizhixiang. It trades about 0.02 of its potential returns per unit of risk. Suzhou Weizhixiang Food is currently generating about -0.02 per unit of risk. If you would invest  802.00  in PetroChina Co Ltd on September 12, 2024 and sell it today you would earn a total of  34.00  from holding PetroChina Co Ltd or generate 4.24% 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.  Suzhou Weizhixiang Food

PetroChina

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PetroChina Co Ltd are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, PetroChina may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Suzhou Weizhixiang Food

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Suzhou Weizhixiang Food are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Suzhou Weizhixiang sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PetroChina and Suzhou Weizhixiang

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

The idea behind PetroChina Co Ltd and Suzhou Weizhixiang Food 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.