Correlation Between Thanh Dat and PetroVietnam Drilling

Can any of the company-specific risk be diversified away by investing in both Thanh Dat and PetroVietnam Drilling 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 Thanh Dat and PetroVietnam Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Thanh Dat Investment and PetroVietnam Drilling Well, you can compare the effects of market volatilities on Thanh Dat and PetroVietnam Drilling 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 Thanh Dat with a short position of PetroVietnam Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Thanh Dat and PetroVietnam Drilling.

Diversification Opportunities for Thanh Dat and PetroVietnam Drilling

-0.69

Correlation Coefficient

Thanh Dat  PetroVietnam Drilling

Excellent diversification

The 3 months correlation between Thanh and PetroVietnam is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Thanh Dat Investment and PetroVietnam Drilling Well in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PetroVietnam Drilling and Thanh Dat 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 Thanh Dat Investment are associated (or correlated) with PetroVietnam Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PetroVietnam Drilling has no effect on the direction of Thanh Dat i.e., Thanh Dat and PetroVietnam Drilling go up and down completely randomly.

Pair Corralation between Thanh Dat and PetroVietnam Drilling

Assuming the 90 days trading horizon Thanh Dat Investment is expected to generate 1.65 times more return on investment than PetroVietnam Drilling. However, Thanh Dat is 1.65 times more volatile than PetroVietnam Drilling Well. It trades about 0.08 of its potential returns per unit of risk. PetroVietnam Drilling Well is currently generating about -0.21 per unit of risk. If you would invest  2,460,000  in Thanh Dat Investment on October 8, 2024 and sell it today you would earn a total of  230,000  from holding Thanh Dat Investment or generate 9.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Thanh Dat Investment  vs.  PetroVietnam Drilling Well

Thanh Dat Investment

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Thanh Dat Investment are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Thanh Dat may actually be approaching a critical reversion point that can send shares even higher in February 2025.

PetroVietnam Drilling

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PetroVietnam Drilling Well 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 February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Thanh Dat and PetroVietnam Drilling

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

The idea behind Thanh Dat Investment and PetroVietnam Drilling Well 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.