Correlation Between Mechanics Construction and PetroVietnam Transportation
Can any of the company-specific risk be diversified away by investing in both Mechanics Construction and PetroVietnam Transportation 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 Mechanics Construction and PetroVietnam Transportation into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mechanics Construction and and PetroVietnam Transportation Corp, you can compare the effects of market volatilities on Mechanics Construction and PetroVietnam Transportation 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 Mechanics Construction with a short position of PetroVietnam Transportation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mechanics Construction and PetroVietnam Transportation.
Diversification Opportunities for Mechanics Construction and PetroVietnam Transportation
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Mechanics and PetroVietnam is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Mechanics Construction and and PetroVietnam Transportation Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PetroVietnam Transportation and Mechanics Construction 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 Mechanics Construction and are associated (or correlated) with PetroVietnam Transportation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PetroVietnam Transportation has no effect on the direction of Mechanics Construction i.e., Mechanics Construction and PetroVietnam Transportation go up and down completely randomly.
Pair Corralation between Mechanics Construction and PetroVietnam Transportation
Assuming the 90 days trading horizon Mechanics Construction and is expected to generate 1.33 times more return on investment than PetroVietnam Transportation. However, Mechanics Construction is 1.33 times more volatile than PetroVietnam Transportation Corp. It trades about 0.01 of its potential returns per unit of risk. PetroVietnam Transportation Corp is currently generating about -0.19 per unit of risk. If you would invest 850,000 in Mechanics Construction and on September 12, 2024 and sell it today you would earn a total of 0.00 from holding Mechanics Construction and or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 68.18% |
| Values | Daily Returns |
Mechanics Construction and vs. PetroVietnam Transportation Co
Performance |
| Timeline |
| Mechanics Construction |
| PetroVietnam Transportation |
Mechanics Construction and PetroVietnam Transportation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mechanics Construction and PetroVietnam Transportation
The main advantage of trading using opposite Mechanics Construction and PetroVietnam Transportation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mechanics Construction position performs unexpectedly, PetroVietnam Transportation 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 PetroVietnam Transportation will offset losses from the drop in PetroVietnam Transportation's long position.The idea behind Mechanics Construction and and PetroVietnam Transportation Corp 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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