Correlation Between Vietnam Petroleum and Japan Vietnam
Can any of the company-specific risk be diversified away by investing in both Vietnam Petroleum and Japan Vietnam 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 Vietnam Petroleum and Japan Vietnam into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vietnam Petroleum Transport and Japan Vietnam Medical, you can compare the effects of market volatilities on Vietnam Petroleum and Japan Vietnam 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 Vietnam Petroleum with a short position of Japan Vietnam. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vietnam Petroleum and Japan Vietnam.
Diversification Opportunities for Vietnam Petroleum and Japan Vietnam
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Vietnam and Japan is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Vietnam Petroleum Transport and Japan Vietnam Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Vietnam Medical and Vietnam Petroleum 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 Vietnam Petroleum Transport are associated (or correlated) with Japan Vietnam. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Japan Vietnam Medical has no effect on the direction of Vietnam Petroleum i.e., Vietnam Petroleum and Japan Vietnam go up and down completely randomly.
Pair Corralation between Vietnam Petroleum and Japan Vietnam
Assuming the 90 days trading horizon Vietnam Petroleum Transport is expected to under-perform the Japan Vietnam. But the stock apears to be less risky and, when comparing its historical volatility, Vietnam Petroleum Transport is 1.84 times less risky than Japan Vietnam. The stock trades about -0.24 of its potential returns per unit of risk. The Japan Vietnam Medical is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest 430,000 in Japan Vietnam Medical on December 23, 2024 and sell it today you would earn a total of 109,000 from holding Japan Vietnam Medical or generate 25.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vietnam Petroleum Transport vs. Japan Vietnam Medical
Performance |
| Timeline |
| Vietnam Petroleum |
| Japan Vietnam Medical |
Vietnam Petroleum and Japan Vietnam Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vietnam Petroleum and Japan Vietnam
The main advantage of trading using opposite Vietnam Petroleum and Japan Vietnam positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vietnam Petroleum position performs unexpectedly, Japan Vietnam 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 Japan Vietnam will offset losses from the drop in Japan Vietnam's long position.The idea behind Vietnam Petroleum Transport and Japan Vietnam Medical 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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