Correlation Between Binhthuan Agriculture and Petrolimex Petrochemical
Can any of the company-specific risk be diversified away by investing in both Binhthuan Agriculture and Petrolimex Petrochemical 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 Binhthuan Agriculture and Petrolimex Petrochemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Binhthuan Agriculture Services and Petrolimex Petrochemical JSC, you can compare the effects of market volatilities on Binhthuan Agriculture and Petrolimex Petrochemical 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 Binhthuan Agriculture with a short position of Petrolimex Petrochemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Binhthuan Agriculture and Petrolimex Petrochemical.
Diversification Opportunities for Binhthuan Agriculture and Petrolimex Petrochemical
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Binhthuan and Petrolimex is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Binhthuan Agriculture Services and Petrolimex Petrochemical JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petrolimex Petrochemical and Binhthuan Agriculture 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 Binhthuan Agriculture Services are associated (or correlated) with Petrolimex Petrochemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petrolimex Petrochemical has no effect on the direction of Binhthuan Agriculture i.e., Binhthuan Agriculture and Petrolimex Petrochemical go up and down completely randomly.
Pair Corralation between Binhthuan Agriculture and Petrolimex Petrochemical
Assuming the 90 days trading horizon Binhthuan Agriculture Services is expected to generate 0.84 times more return on investment than Petrolimex Petrochemical. However, Binhthuan Agriculture Services is 1.2 times less risky than Petrolimex Petrochemical. It trades about -0.11 of its potential returns per unit of risk. Petrolimex Petrochemical JSC is currently generating about -0.24 per unit of risk. If you would invest 422,000 in Binhthuan Agriculture Services on September 3, 2024 and sell it today you would lose (29,000) from holding Binhthuan Agriculture Services or give up 6.87% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 97.67% |
| Values | Daily Returns |
Binhthuan Agriculture Services vs. Petrolimex Petrochemical JSC
Performance |
| Timeline |
| Binhthuan Agriculture |
| Petrolimex Petrochemical |
Binhthuan Agriculture and Petrolimex Petrochemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Binhthuan Agriculture and Petrolimex Petrochemical
The main advantage of trading using opposite Binhthuan Agriculture and Petrolimex Petrochemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Binhthuan Agriculture position performs unexpectedly, Petrolimex Petrochemical 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 Petrolimex Petrochemical will offset losses from the drop in Petrolimex Petrochemical's long position.The idea behind Binhthuan Agriculture Services and Petrolimex Petrochemical JSC 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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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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