Correlation Between Petrolimex Insurance and FPT Digital

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

By analyzing existing cross correlation between Petrolimex Insurance Corp and FPT Digital Retail, you can compare the effects of market volatilities on Petrolimex Insurance and FPT Digital 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 Petrolimex Insurance with a short position of FPT Digital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Petrolimex Insurance and FPT Digital.

Diversification Opportunities for Petrolimex Insurance and FPT Digital

0.29

Correlation Coefficient

Petrolimex Insurance  FPT Digital

Modest diversification

The 3 months correlation between Petrolimex and FPT is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Petrolimex Insurance Corp and FPT Digital Retail in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FPT Digital Retail and Petrolimex Insurance 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 Petrolimex Insurance Corp are associated (or correlated) with FPT Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FPT Digital Retail has no effect on the direction of Petrolimex Insurance i.e., Petrolimex Insurance and FPT Digital go up and down completely randomly.

Pair Corralation between Petrolimex Insurance and FPT Digital

Assuming the 90 days trading horizon Petrolimex Insurance is expected to generate 9.37 times less return on investment than FPT Digital. In addition to that, Petrolimex Insurance is 1.42 times more volatile than FPT Digital Retail. It trades about 0.01 of its total potential returns per unit of risk. FPT Digital Retail is currently generating about 0.13 per unit of volatility. If you would invest  5,987,206  in FPT Digital Retail on December 5, 2024 and sell it today you would earn a total of  11,962,794  from holding FPT Digital Retail or generate 199.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	68.64%
Values	Daily Returns

Petrolimex Insurance Corp  vs.  FPT Digital Retail

Petrolimex Insurance Corp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Petrolimex Insurance Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating forward indicators, Petrolimex Insurance displayed solid returns over the last few months and may actually be approaching a breakup point.

FPT Digital Retail

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Petrolimex Insurance and FPT Digital

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

The idea behind Petrolimex Insurance Corp and FPT Digital Retail 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.