Correlation Between PetroChina and OMV AG

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

Diversification Opportunities for PetroChina and OMV AG

0.83

Correlation Coefficient

PetroChina  OMV AG

Very poor diversification

The 3 months correlation between PetroChina and OMV is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding PetroChina Co Ltd and OMV AG PK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OMV AG PK 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 OMV AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OMV AG PK has no effect on the direction of PetroChina i.e., PetroChina and OMV AG go up and down completely randomly.

Pair Corralation between PetroChina and OMV AG

Assuming the 90 days horizon PetroChina is expected to generate 2.69 times less return on investment than OMV AG. In addition to that, PetroChina is 2.33 times more volatile than OMV AG PK. It trades about 0.05 of its total potential returns per unit of risk. OMV AG PK is currently generating about 0.29 per unit of volatility. If you would invest  1,175  in OMV AG PK on February 13, 2024 and sell it today you would earn a total of  96.00  from holding OMV AG PK or generate 8.17% return on investment over 90 days.

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

PetroChina Co Ltd  vs.  OMV AG PK

PetroChina

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in PetroChina Co Ltd are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, PetroChina reported solid returns over the last few months and may actually be approaching a breakup point.

OMV AG PK

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in OMV AG PK are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward-looking signals, OMV AG showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PetroChina and OMV AG

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

The idea behind PetroChina Co Ltd and OMV AG PK 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.