Correlation Between Bich Chi and PetroVietnam Drilling

Can any of the company-specific risk be diversified away by investing in both Bich Chi 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 Bich Chi and PetroVietnam Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bich Chi Food and PetroVietnam Drilling Well, you can compare the effects of market volatilities on Bich Chi 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 Bich Chi with a short position of PetroVietnam Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bich Chi and PetroVietnam Drilling.

Diversification Opportunities for Bich Chi and PetroVietnam Drilling

-0.79

Correlation Coefficient

Bich Chi  PetroVietnam Drilling

Pay attention - limited upside

The 3 months correlation between Bich and PetroVietnam is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Bich Chi Food and PetroVietnam Drilling Well in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PetroVietnam Drilling and Bich Chi 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 Bich Chi Food 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 has no effect on the direction of Bich Chi i.e., Bich Chi and PetroVietnam Drilling go up and down completely randomly.

Pair Corralation between Bich Chi and PetroVietnam Drilling

Assuming the 90 days trading horizon Bich Chi Food is expected to generate 2.03 times more return on investment than PetroVietnam Drilling. However, Bich Chi is 2.03 times more volatile than PetroVietnam Drilling Well. It trades about 0.16 of its potential returns per unit of risk. PetroVietnam Drilling Well is currently generating about 0.06 per unit of risk. If you would invest  3,900,000  in Bich Chi Food on September 23, 2024 and sell it today you would earn a total of  200,000  from holding Bich Chi Food or generate 5.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	59.09%
Values	Daily Returns

Bich Chi Food  vs.  PetroVietnam Drilling Well

Bich Chi Food

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bich Chi Food are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Bich Chi displayed solid returns over the last few months and may actually be approaching a breakup point.

PetroVietnam Drilling

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PetroVietnam Drilling Well has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Bich Chi and PetroVietnam Drilling

The main advantage of trading using opposite Bich Chi and PetroVietnam Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bich Chi 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 Bich Chi Food and PetroVietnam Drilling Well 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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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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.