Correlation Between China Petroleum and Origin Energy

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

By analyzing existing cross correlation between China Petroleum Chemical and Origin Energy Ltd, you can compare the effects of market volatilities on China Petroleum and Origin Energy 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 China Petroleum with a short position of Origin Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Petroleum and Origin Energy.

Diversification Opportunities for China Petroleum and Origin Energy

-0.28

Correlation Coefficient

China Petroleum  Origin Energy

Very good diversification

The 3 months correlation between China and Origin is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding China Petroleum Chemical and Origin Energy Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Origin Energy and China Petroleum 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 China Petroleum Chemical are associated (or correlated) with Origin Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Origin Energy has no effect on the direction of China Petroleum i.e., China Petroleum and Origin Energy go up and down completely randomly.

Pair Corralation between China Petroleum and Origin Energy

Assuming the 90 days horizon China Petroleum is expected to generate 1.03 times less return on investment than Origin Energy. In addition to that, China Petroleum is 2.56 times more volatile than Origin Energy Ltd. It trades about 0.02 of its total potential returns per unit of risk. Origin Energy Ltd is currently generating about 0.05 per unit of volatility. If you would invest  625.00  in Origin Energy Ltd on September 15, 2024 and sell it today you would earn a total of  25.00  from holding Origin Energy Ltd or generate 4.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

China Petroleum Chemical  vs.  Origin Energy Ltd

China Petroleum Chemical

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in China Petroleum Chemical are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable primary indicators, China Petroleum is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Origin Energy

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Origin Energy Ltd are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical and fundamental indicators, Origin Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with China Petroleum and Origin Energy

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

The idea behind China Petroleum Chemical and Origin Energy 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.

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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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.