Correlation Between Petrovietnam Technical and PetroVietnam Transportation
Can any of the company-specific risk be diversified away by investing in both Petrovietnam Technical 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 Petrovietnam Technical and PetroVietnam Transportation into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Petrovietnam Technical Services and PetroVietnam Transportation Corp, you can compare the effects of market volatilities on Petrovietnam Technical 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 Petrovietnam Technical with a short position of PetroVietnam Transportation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Petrovietnam Technical and PetroVietnam Transportation.
Diversification Opportunities for Petrovietnam Technical and PetroVietnam Transportation
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Petrovietnam and PetroVietnam is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Petrovietnam Technical Service and PetroVietnam Transportation Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PetroVietnam Transportation and Petrovietnam Technical 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 Petrovietnam Technical Services 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 Petrovietnam Technical i.e., Petrovietnam Technical and PetroVietnam Transportation go up and down completely randomly.
Pair Corralation between Petrovietnam Technical and PetroVietnam Transportation
Assuming the 90 days trading horizon Petrovietnam Technical Services is expected to under-perform the PetroVietnam Transportation. But the stock apears to be less risky and, when comparing its historical volatility, Petrovietnam Technical Services is 1.03 times less risky than PetroVietnam Transportation. The stock trades about -0.21 of its potential returns per unit of risk. The PetroVietnam Transportation Corp is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest 2,825,000 in PetroVietnam Transportation Corp on September 3, 2024 and sell it today you would lose (125,000) from holding PetroVietnam Transportation Corp or give up 4.42% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.44% |
| Values | Daily Returns |
Petrovietnam Technical Service vs. PetroVietnam Transportation Co
Performance |
| Timeline |
| Petrovietnam Technical |
| PetroVietnam Transportation |
Petrovietnam Technical and PetroVietnam Transportation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Petrovietnam Technical and PetroVietnam Transportation
The main advantage of trading using opposite Petrovietnam Technical and PetroVietnam Transportation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Petrovietnam Technical 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 Petrovietnam Technical Services 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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