Correlation Between Sao Ta and Petrovietnam Technical

Can any of the company-specific risk be diversified away by investing in both Sao Ta and Petrovietnam Technical 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 Sao Ta and Petrovietnam Technical into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sao Ta Foods and Petrovietnam Technical Services, you can compare the effects of market volatilities on Sao Ta and Petrovietnam Technical 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 Sao Ta with a short position of Petrovietnam Technical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sao Ta and Petrovietnam Technical.

Diversification Opportunities for Sao Ta and Petrovietnam Technical

0.41

Correlation Coefficient

Sao Ta  Petrovietnam Technical

Very weak diversification

The 3 months correlation between Sao and Petrovietnam is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Sao Ta Foods and Petrovietnam Technical Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petrovietnam Technical and Sao Ta 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 Sao Ta Foods are associated (or correlated) with Petrovietnam Technical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petrovietnam Technical has no effect on the direction of Sao Ta i.e., Sao Ta and Petrovietnam Technical go up and down completely randomly.

Pair Corralation between Sao Ta and Petrovietnam Technical

Assuming the 90 days trading horizon Sao Ta Foods is expected to generate 0.82 times more return on investment than Petrovietnam Technical. However, Sao Ta Foods is 1.22 times less risky than Petrovietnam Technical. It trades about 0.02 of its potential returns per unit of risk. Petrovietnam Technical Services is currently generating about -0.06 per unit of risk. If you would invest  4,685,000  in Sao Ta Foods on December 28, 2024 and sell it today you would earn a total of  50,000  from holding Sao Ta Foods or generate 1.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.31%
Values	Daily Returns

Sao Ta Foods  vs.  Petrovietnam Technical Service

Sao Ta Foods

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sao Ta Foods are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Sao Ta is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Petrovietnam Technical

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Sao Ta and Petrovietnam Technical

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

The idea behind Sao Ta Foods and Petrovietnam Technical Services 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.