Correlation Between PetroChina and PTT PCL

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

Diversification Opportunities for PetroChina and PTT PCL

-0.53

Correlation Coefficient

PetroChina  PTT PCL

Excellent diversification

The 3 months correlation between PetroChina and PTT is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding PetroChina Co Ltd and PTT PCL ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PTT PCL ADR 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 PTT PCL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PTT PCL ADR has no effect on the direction of PetroChina i.e., PetroChina and PTT PCL go up and down completely randomly.

Pair Corralation between PetroChina and PTT PCL

Assuming the 90 days horizon PetroChina Co Ltd is expected to under-perform the PTT PCL. In addition to that, PetroChina is 5.38 times more volatile than PTT PCL ADR. It trades about -0.03 of its total potential returns per unit of risk. PTT PCL ADR is currently generating about 0.17 per unit of volatility. If you would invest  456.00  in PTT PCL ADR on August 24, 2024 and sell it today you would earn a total of  39.00  from holding PTT PCL ADR or generate 8.55% return on investment over 90 days.

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

PetroChina Co Ltd  vs.  PTT PCL ADR

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 fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

PTT PCL ADR

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PTT PCL ADR are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, PTT PCL may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with PetroChina and PTT PCL

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

The idea behind PetroChina Co Ltd and PTT PCL ADR 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.