Correlation Between Vien Dong and Petrovietnam Drilling
Can any of the company-specific risk be diversified away by investing in both Vien Dong and Petrovietnam Drilling 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 Vien Dong and Petrovietnam Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vien Dong Investment and Petrovietnam Drilling Mud, you can compare the effects of market volatilities on Vien Dong and Petrovietnam Drilling 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 Vien Dong with a short position of Petrovietnam Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vien Dong and Petrovietnam Drilling.
Diversification Opportunities for Vien Dong and Petrovietnam Drilling
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vien and Petrovietnam is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Vien Dong Investment and Petrovietnam Drilling Mud in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petrovietnam Drilling Mud and Vien Dong 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 Vien Dong Investment are associated (or correlated) with Petrovietnam Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petrovietnam Drilling Mud has no effect on the direction of Vien Dong i.e., Vien Dong and Petrovietnam Drilling go up and down completely randomly.
Pair Corralation between Vien Dong and Petrovietnam Drilling
Assuming the 90 days trading horizon Vien Dong Investment is expected to generate 1.91 times more return on investment than Petrovietnam Drilling. However, Vien Dong is 1.91 times more volatile than Petrovietnam Drilling Mud. It trades about 0.22 of its potential returns per unit of risk. Petrovietnam Drilling Mud is currently generating about 0.01 per unit of risk. If you would invest 494,000 in Vien Dong Investment on November 7, 2024 and sell it today you would earn a total of 44,000 from holding Vien Dong Investment or generate 8.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vien Dong Investment vs. Petrovietnam Drilling Mud
Performance |
| Timeline |
| Vien Dong Investment |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Insignificant
| Petrovietnam Drilling Mud |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Vien Dong and Petrovietnam Drilling Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vien Dong and Petrovietnam Drilling
The main advantage of trading using opposite Vien Dong and Petrovietnam Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vien Dong position performs unexpectedly, Petrovietnam Drilling 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 Drilling will offset losses from the drop in Petrovietnam Drilling's long position.The idea behind Vien Dong Investment and Petrovietnam Drilling Mud 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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