Correlation Between CMC Investment and Petrovietnam Technical

Can any of the company-specific risk be diversified away by investing in both CMC Investment and Petrovietnam Technical 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 CMC Investment and Petrovietnam Technical into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CMC Investment JSC and Petrovietnam Technical Services, you can compare the effects of market volatilities on CMC Investment and Petrovietnam Technical 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 CMC Investment with a short position of Petrovietnam Technical. Check out your portfolio center. Please also check ongoing floating volatility patterns of CMC Investment and Petrovietnam Technical.

Diversification Opportunities for CMC Investment and Petrovietnam Technical

0.08

Correlation Coefficient

CMC Investment  Petrovietnam Technical

Significant diversification

The 3 months correlation between CMC and Petrovietnam is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding CMC Investment JSC and Petrovietnam Technical Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petrovietnam Technical and CMC Investment 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 CMC Investment JSC are associated (or correlated) with Petrovietnam Technical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petrovietnam Technical has no effect on the direction of CMC Investment i.e., CMC Investment and Petrovietnam Technical go up and down completely randomly.

Pair Corralation between CMC Investment and Petrovietnam Technical

Assuming the 90 days trading horizon CMC Investment JSC is expected to generate 5.65 times more return on investment than Petrovietnam Technical. However, CMC Investment is 5.65 times more volatile than Petrovietnam Technical Services. It trades about 0.07 of its potential returns per unit of risk. Petrovietnam Technical Services is currently generating about -0.06 per unit of risk. If you would invest  600,000  in CMC Investment JSC on December 22, 2024 and sell it today you would earn a total of  80,000  from holding CMC Investment JSC or generate 13.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	81.36%
Values	Daily Returns

CMC Investment JSC  vs.  Petrovietnam Technical Service

CMC Investment JSC

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CMC Investment JSC are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, CMC Investment displayed solid returns over the last few months and may actually be approaching a breakup point.

Petrovietnam Technical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Petrovietnam Technical Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Petrovietnam Technical is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with CMC Investment and Petrovietnam Technical

The main advantage of trading using opposite CMC Investment and Petrovietnam Technical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CMC Investment position performs unexpectedly, Petrovietnam Technical 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 Technical will offset losses from the drop in Petrovietnam Technical's long position.

The idea behind CMC Investment JSC and Petrovietnam Technical Services 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.