Correlation Between Song Hong and PetroVietnam Drilling

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Can any of the company-specific risk be diversified away by investing in both Song Hong 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 Song Hong and PetroVietnam Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Song Hong Construction and PetroVietnam Drilling Well, you can compare the effects of market volatilities on Song Hong 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 Song Hong with a short position of PetroVietnam Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Song Hong and PetroVietnam Drilling.

Diversification Opportunities for Song Hong and PetroVietnam Drilling

0.13
  Correlation Coefficient

Average diversification

The 3 months correlation between Song and PetroVietnam is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Song Hong Construction and PetroVietnam Drilling Well in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PetroVietnam Drilling and Song Hong 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 Song Hong Construction 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 Song Hong i.e., Song Hong and PetroVietnam Drilling go up and down completely randomly.

Pair Corralation between Song Hong and PetroVietnam Drilling

Assuming the 90 days trading horizon Song Hong Construction is expected to generate 2.99 times more return on investment than PetroVietnam Drilling. However, Song Hong is 2.99 times more volatile than PetroVietnam Drilling Well. It trades about 0.07 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  720,000  in Song Hong Construction on October 6, 2024 and sell it today you would earn a total of  70,000  from holding Song Hong Construction or generate 9.72% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy73.44%
ValuesDaily Returns

Song Hong Construction  vs.  PetroVietnam Drilling Well

 Performance 
       Timeline  
Song Hong Construction 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Song Hong Construction are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Song Hong displayed solid returns over the last few months and may actually be approaching a breakup point.
PetroVietnam Drilling 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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.

Song Hong and PetroVietnam Drilling Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Song Hong and PetroVietnam Drilling

The main advantage of trading using opposite Song Hong and PetroVietnam Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Song Hong 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 Song Hong Construction 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.
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.

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