Correlation Between LDG Investment and Petrovietnam Technical

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

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

Diversification Opportunities for LDG Investment and Petrovietnam Technical

0.49

Correlation Coefficient

LDG Investment  Petrovietnam Technical

Very weak diversification

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

Pair Corralation between LDG Investment and Petrovietnam Technical

Assuming the 90 days trading horizon LDG Investment JSC is expected to generate 1.78 times more return on investment than Petrovietnam Technical. However, LDG Investment is 1.78 times more volatile than Petrovietnam Technical Services. It trades about 0.18 of its potential returns per unit of risk. Petrovietnam Technical Services is currently generating about 0.04 per unit of risk. If you would invest  184,000  in LDG Investment JSC on December 2, 2024 and sell it today you would earn a total of  42,000  from holding LDG Investment JSC or generate 22.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

LDG Investment JSC  vs.  Petrovietnam Technical Service

LDG Investment JSC

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in LDG Investment JSC are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, LDG Investment displayed solid returns over the last few months and may actually be approaching a breakup point.

Petrovietnam Technical

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Petrovietnam Technical Services are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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 LDG Investment and Petrovietnam Technical

The main advantage of trading using opposite LDG Investment and Petrovietnam Technical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LDG Investment 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 LDG Investment JSC 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.

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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.