Correlation Between Petrolimex International and Hanoi Plastics
Can any of the company-specific risk be diversified away by investing in both Petrolimex International and Hanoi Plastics 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 Petrolimex International and Hanoi Plastics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Petrolimex International Trading and Hanoi Plastics JSC, you can compare the effects of market volatilities on Petrolimex International and Hanoi Plastics 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 Petrolimex International with a short position of Hanoi Plastics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Petrolimex International and Hanoi Plastics.
Diversification Opportunities for Petrolimex International and Hanoi Plastics
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between Petrolimex and Hanoi is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Petrolimex International Tradi and Hanoi Plastics JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanoi Plastics JSC and Petrolimex International 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 Petrolimex International Trading are associated (or correlated) with Hanoi Plastics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanoi Plastics JSC has no effect on the direction of Petrolimex International i.e., Petrolimex International and Hanoi Plastics go up and down completely randomly.
Pair Corralation between Petrolimex International and Hanoi Plastics
Assuming the 90 days trading horizon Petrolimex International Trading is expected to generate 1.31 times more return on investment than Hanoi Plastics. However, Petrolimex International is 1.31 times more volatile than Hanoi Plastics JSC. It trades about 0.03 of its potential returns per unit of risk. Hanoi Plastics JSC is currently generating about 0.01 per unit of risk. If you would invest 425,000 in Petrolimex International Trading on September 3, 2024 and sell it today you would earn a total of 90,000 from holding Petrolimex International Trading or generate 21.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 98.17% |
| Values | Daily Returns |
Petrolimex International Tradi vs. Hanoi Plastics JSC
Performance |
| Timeline |
| Petrolimex International |
| Hanoi Plastics JSC |
Petrolimex International and Hanoi Plastics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Petrolimex International and Hanoi Plastics
The main advantage of trading using opposite Petrolimex International and Hanoi Plastics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Petrolimex International position performs unexpectedly, Hanoi Plastics 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 Hanoi Plastics will offset losses from the drop in Hanoi Plastics' long position.The idea behind Petrolimex International Trading and Hanoi Plastics 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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