Correlation Between Materials Petroleum and Vu Dang

Can any of the company-specific risk be diversified away by investing in both Materials Petroleum and Vu Dang 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 Materials Petroleum and Vu Dang into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Materials Petroleum and Vu Dang

0.23

Correlation Coefficient

Materials Petroleum  Vu Dang

Modest diversification

The 3 months correlation between Materials and SVD is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Materials Petroleum JSC and Vu Dang Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vu Dang Investment and Materials 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 Materials Petroleum JSC are associated (or correlated) with Vu Dang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vu Dang Investment has no effect on the direction of Materials Petroleum i.e., Materials Petroleum and Vu Dang go up and down completely randomly.

Pair Corralation between Materials Petroleum and Vu Dang

Assuming the 90 days trading horizon Materials Petroleum JSC is expected to under-perform the Vu Dang. In addition to that, Materials Petroleum is 1.51 times more volatile than Vu Dang Investment. It trades about -0.14 of its total potential returns per unit of risk. Vu Dang Investment is currently generating about -0.13 per unit of volatility. If you would invest  344,000  in Vu Dang Investment on October 11, 2024 and sell it today you would lose (17,000) from holding Vu Dang Investment or give up 4.94% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	52.38%
Values	Daily Returns

Materials Petroleum JSC  vs.  Vu Dang Investment

Materials Petroleum JSC

Risk-Adjusted Performance

0 of 100

Weak

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

Vu Dang Investment

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Vu Dang Investment are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Vu Dang is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Materials Petroleum and Vu Dang

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

The idea behind Materials Petroleum JSC and Vu Dang Investment 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.