Correlation Between Ha Long and Petrolimex International

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

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

Diversification Opportunities for Ha Long and Petrolimex International

0.49

Correlation Coefficient

Ha Long  Petrolimex International

Very weak diversification

The 3 months correlation between HID and Petrolimex is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Ha Long Investment and Petrolimex International Tradi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petrolimex International and Ha Long 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 Ha Long Investment 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 Ha Long i.e., Ha Long and Petrolimex International go up and down completely randomly.

Pair Corralation between Ha Long and Petrolimex International

Assuming the 90 days trading horizon Ha Long is expected to generate 8.12 times less return on investment than Petrolimex International. But when comparing it to its historical volatility, Ha Long Investment is 2.3 times less risky than Petrolimex International. It trades about 0.05 of its potential returns per unit of risk. Petrolimex International Trading is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  525,000  in Petrolimex International Trading on December 30, 2024 and sell it today you would earn a total of  145,000  from holding Petrolimex International Trading or generate 27.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.67%
Values	Daily Returns

Ha Long Investment  vs.  Petrolimex International Tradi

Ha Long Investment

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ha Long Investment are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Ha Long is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Petrolimex International

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Petrolimex International Trading are ranked lower than 12 (%) 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 Ha Long and Petrolimex International

The main advantage of trading using opposite Ha Long and Petrolimex International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ha Long 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 Ha Long Investment 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.