Correlation Between Chevron Corp and PetroChina

Can any of the company-specific risk be diversified away by investing in both Chevron Corp and PetroChina 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 Chevron Corp and PetroChina into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Chevron Corp and PetroChina Co Ltd, you can compare the effects of market volatilities on Chevron Corp and PetroChina 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 Chevron Corp with a short position of PetroChina. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chevron Corp and PetroChina.

Diversification Opportunities for Chevron Corp and PetroChina

-0.41

Correlation Coefficient

Chevron Corp  PetroChina

Very good diversification

The 3 months correlation between Chevron and PetroChina is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Chevron Corp and PetroChina Co Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PetroChina and Chevron Corp 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 Chevron Corp are associated (or correlated) with PetroChina. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PetroChina has no effect on the direction of Chevron Corp i.e., Chevron Corp and PetroChina go up and down completely randomly.

Pair Corralation between Chevron Corp and PetroChina

Considering the 90-day investment horizon Chevron Corp is expected to generate 1.19 times less return on investment than PetroChina. But when comparing it to its historical volatility, Chevron Corp is 3.66 times less risky than PetroChina. It trades about 0.13 of its potential returns per unit of risk. PetroChina Co Ltd is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  70.00  in PetroChina Co Ltd on September 15, 2024 and sell it today you would earn a total of  4.00  from holding PetroChina Co Ltd or generate 5.71% return on investment over 90 days.

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

Chevron Corp  vs.  PetroChina Co Ltd

Chevron Corp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chevron Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Chevron Corp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

PetroChina

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PetroChina Co Ltd are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, PetroChina may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Chevron Corp and PetroChina

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

The idea behind Chevron Corp and PetroChina Co Ltd 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.