Correlation Between Danang Rubber and Vietnam Petroleum

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

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

Diversification Opportunities for Danang Rubber and Vietnam Petroleum

0.21

Correlation Coefficient

Danang Rubber  Vietnam Petroleum

Modest diversification

The 3 months correlation between Danang and Vietnam is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Danang Rubber JSC and Vietnam Petroleum Transport in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vietnam Petroleum and Danang Rubber 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 Danang Rubber JSC are associated (or correlated) with Vietnam Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vietnam Petroleum has no effect on the direction of Danang Rubber i.e., Danang Rubber and Vietnam Petroleum go up and down completely randomly.

Pair Corralation between Danang Rubber and Vietnam Petroleum

Assuming the 90 days trading horizon Danang Rubber JSC is expected to under-perform the Vietnam Petroleum. But the stock apears to be less risky and, when comparing its historical volatility, Danang Rubber JSC is 1.74 times less risky than Vietnam Petroleum. The stock trades about -0.23 of its potential returns per unit of risk. The Vietnam Petroleum Transport is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,480,000  in Vietnam Petroleum Transport on December 21, 2024 and sell it today you would earn a total of  0.00  from holding Vietnam Petroleum Transport or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Danang Rubber JSC  vs.  Vietnam Petroleum Transport

Danang Rubber JSC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Danang Rubber JSC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Vietnam Petroleum

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Danang Rubber and Vietnam Petroleum

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

The idea behind Danang Rubber JSC and Vietnam Petroleum Transport 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.