Correlation Between Vietnam JSCmmercial and Petrolimex International

Can any of the company-specific risk be diversified away by investing in both Vietnam JSCmmercial and Petrolimex International 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 JSCmmercial and Petrolimex International into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Vietnam JSCmmercial Bank and Petrolimex International Trading, you can compare the effects of market volatilities on Vietnam JSCmmercial and Petrolimex International 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 JSCmmercial with a short position of Petrolimex International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vietnam JSCmmercial and Petrolimex International.

Diversification Opportunities for Vietnam JSCmmercial and Petrolimex International

0.84

Correlation Coefficient

Vietnam JSCmmercial  Petrolimex International

Very poor diversification

The 3 months correlation between Vietnam and Petrolimex is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Vietnam JSCmmercial Bank and Petrolimex International Tradi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petrolimex International and Vietnam JSCmmercial 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 JSCmmercial Bank are associated (or correlated) with Petrolimex International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petrolimex International has no effect on the direction of Vietnam JSCmmercial i.e., Vietnam JSCmmercial and Petrolimex International go up and down completely randomly.

Pair Corralation between Vietnam JSCmmercial and Petrolimex International

Assuming the 90 days trading horizon Vietnam JSCmmercial is expected to generate 1.47 times less return on investment than Petrolimex International. But when comparing it to its historical volatility, Vietnam JSCmmercial Bank is 2.01 times less risky than Petrolimex International. It trades about 0.19 of its potential returns per unit of risk. Petrolimex International Trading is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  547,000  in Petrolimex International Trading on December 24, 2024 and sell it today you would earn a total of  112,000  from holding Petrolimex International Trading or generate 20.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	96.61%
Values	Daily Returns

Vietnam JSCmmercial Bank  vs.  Petrolimex International Tradi

Vietnam JSCmmercial Bank

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vietnam JSCmmercial Bank are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Vietnam JSCmmercial displayed solid returns over the last few months and may actually be approaching a breakup point.

Petrolimex International

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Petrolimex International Trading are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Petrolimex International displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vietnam JSCmmercial and Petrolimex International

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

The idea behind Vietnam JSCmmercial Bank and Petrolimex International Trading 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 Transaction History module to view history of all your transactions and understand their impact on performance.