Correlation Between PetroVietnam Transportation and Nam Long
Can any of the company-specific risk be diversified away by investing in both PetroVietnam Transportation and Nam Long 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 Transportation and Nam Long into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PetroVietnam Transportation Corp and Nam Long Investment, you can compare the effects of market volatilities on PetroVietnam Transportation and Nam Long 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 Transportation with a short position of Nam Long. Check out your portfolio center. Please also check ongoing floating volatility patterns of PetroVietnam Transportation and Nam Long.
Diversification Opportunities for PetroVietnam Transportation and Nam Long
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between PetroVietnam and Nam is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding PetroVietnam Transportation Co and Nam Long Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nam Long Investment and PetroVietnam Transportation 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 Transportation Corp are associated (or correlated) with Nam Long. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nam Long Investment has no effect on the direction of PetroVietnam Transportation i.e., PetroVietnam Transportation and Nam Long go up and down completely randomly.
Pair Corralation between PetroVietnam Transportation and Nam Long
Assuming the 90 days trading horizon PetroVietnam Transportation Corp is expected to generate 0.81 times more return on investment than Nam Long. However, PetroVietnam Transportation Corp is 1.23 times less risky than Nam Long. It trades about 0.2 of its potential returns per unit of risk. Nam Long Investment is currently generating about -0.24 per unit of risk. If you would invest 2,540,000 in PetroVietnam Transportation Corp on November 28, 2024 and sell it today you would earn a total of 95,000 from holding PetroVietnam Transportation Corp or generate 3.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
PetroVietnam Transportation Co vs. Nam Long Investment
Performance |
| Timeline |
| PetroVietnam Transportation |
| Nam Long Investment |
PetroVietnam Transportation and Nam Long Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PetroVietnam Transportation and Nam Long
The main advantage of trading using opposite PetroVietnam Transportation and Nam Long positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PetroVietnam Transportation position performs unexpectedly, Nam Long 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 Nam Long will offset losses from the drop in Nam Long's long position.The idea behind PetroVietnam Transportation Corp and Nam Long Investment 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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