Correlation Between PetroVietnam Transportation and Tienlen Steel
Can any of the company-specific risk be diversified away by investing in both PetroVietnam Transportation and Tienlen Steel 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 Tienlen Steel 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 Tienlen Steel Corp, you can compare the effects of market volatilities on PetroVietnam Transportation and Tienlen Steel 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 Tienlen Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of PetroVietnam Transportation and Tienlen Steel.
Diversification Opportunities for PetroVietnam Transportation and Tienlen Steel
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between PetroVietnam and Tienlen is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding PetroVietnam Transportation Co and Tienlen Steel Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tienlen Steel Corp 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 Tienlen Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tienlen Steel Corp has no effect on the direction of PetroVietnam Transportation i.e., PetroVietnam Transportation and Tienlen Steel go up and down completely randomly.
Pair Corralation between PetroVietnam Transportation and Tienlen Steel
Assuming the 90 days trading horizon PetroVietnam Transportation Corp is expected to generate 0.91 times more return on investment than Tienlen Steel. However, PetroVietnam Transportation Corp is 1.1 times less risky than Tienlen Steel. It trades about 0.05 of its potential returns per unit of risk. Tienlen Steel Corp is currently generating about -0.02 per unit of risk. If you would invest 1,822,407 in PetroVietnam Transportation Corp on September 3, 2024 and sell it today you would earn a total of 877,593 from holding PetroVietnam Transportation Corp or generate 48.16% 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. Tienlen Steel Corp
Performance |
| Timeline |
| PetroVietnam Transportation |
| Tienlen Steel Corp |
PetroVietnam Transportation and Tienlen Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PetroVietnam Transportation and Tienlen Steel
The main advantage of trading using opposite PetroVietnam Transportation and Tienlen Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PetroVietnam Transportation position performs unexpectedly, Tienlen Steel 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 Tienlen Steel will offset losses from the drop in Tienlen Steel's long position.The idea behind PetroVietnam Transportation Corp and Tienlen Steel 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.
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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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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