Correlation Between Materials Petroleum and Tay Ninh

Can any of the company-specific risk be diversified away by investing in both Materials Petroleum and Tay Ninh 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 Tay Ninh 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 Tay Ninh Rubber, you can compare the effects of market volatilities on Materials Petroleum and Tay Ninh 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 Tay Ninh. Check out your portfolio center. Please also check ongoing floating volatility patterns of Materials Petroleum and Tay Ninh.

Diversification Opportunities for Materials Petroleum and Tay Ninh

0.02

Correlation Coefficient

Materials Petroleum  Tay Ninh

Significant diversification

The 3 months correlation between Materials and Tay is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Materials Petroleum JSC and Tay Ninh Rubber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tay Ninh Rubber 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 Tay Ninh. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tay Ninh Rubber has no effect on the direction of Materials Petroleum i.e., Materials Petroleum and Tay Ninh go up and down completely randomly.

Pair Corralation between Materials Petroleum and Tay Ninh

Assuming the 90 days trading horizon Materials Petroleum JSC is expected to under-perform the Tay Ninh. In addition to that, Materials Petroleum is 1.19 times more volatile than Tay Ninh Rubber. It trades about -0.03 of its total potential returns per unit of risk. Tay Ninh Rubber is currently generating about 0.04 per unit of volatility. If you would invest  5,200,000  in Tay Ninh Rubber on October 8, 2024 and sell it today you would earn a total of  70,000  from holding Tay Ninh Rubber or generate 1.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	55.0%
Values	Daily Returns

Materials Petroleum JSC  vs.  Tay Ninh Rubber

Materials Petroleum JSC

Risk-Adjusted Performance

0 of 100

Very 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.

Tay Ninh Rubber

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tay Ninh Rubber are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Tay Ninh displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Materials Petroleum and Tay Ninh

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

The idea behind Materials Petroleum JSC and Tay Ninh Rubber 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.