Correlation Between PetroChina and China Mobile

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

Diversification Opportunities for PetroChina and China Mobile

0.73

Correlation Coefficient

PetroChina  China Mobile

Poor diversification

The 3 months correlation between PetroChina and China is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding PetroChina Co Ltd and China Mobile Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Mobile Limited 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 China Mobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Mobile Limited has no effect on the direction of PetroChina i.e., PetroChina and China Mobile go up and down completely randomly.

Pair Corralation between PetroChina and China Mobile

Assuming the 90 days trading horizon PetroChina is expected to generate 1.21 times less return on investment than China Mobile. In addition to that, PetroChina is 1.54 times more volatile than China Mobile Limited. It trades about 0.05 of its total potential returns per unit of risk. China Mobile Limited is currently generating about 0.1 per unit of volatility. If you would invest  10,071  in China Mobile Limited on September 16, 2024 and sell it today you would earn a total of  808.00  from holding China Mobile Limited or generate 8.02% return on investment over 90 days.

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

PetroChina Co Ltd  vs.  China Mobile Limited

PetroChina

Risk-Adjusted Performance

4 of 100

Insignificant

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.

China Mobile Limited

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China Mobile Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China Mobile may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with PetroChina and China Mobile

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

The idea behind PetroChina Co Ltd and China Mobile Limited 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 CEOs Directory module to screen CEOs from public companies around the world.