Correlation Between Petrolimex Information and Vietnam Rubber

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

By analyzing existing cross correlation between Petrolimex Information Technology and Vietnam Rubber Group, you can compare the effects of market volatilities on Petrolimex Information and Vietnam Rubber 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 Information with a short position of Vietnam Rubber. Check out your portfolio center. Please also check ongoing floating volatility patterns of Petrolimex Information and Vietnam Rubber.

Diversification Opportunities for Petrolimex Information and Vietnam Rubber

0.8

Correlation Coefficient

Petrolimex Information  Vietnam Rubber

Very poor diversification

The 3 months correlation between Petrolimex and Vietnam is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Petrolimex Information Technol and Vietnam Rubber Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vietnam Rubber Group and Petrolimex Information 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 Information Technology are associated (or correlated) with Vietnam Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vietnam Rubber Group has no effect on the direction of Petrolimex Information i.e., Petrolimex Information and Vietnam Rubber go up and down completely randomly.

Pair Corralation between Petrolimex Information and Vietnam Rubber

Assuming the 90 days trading horizon Petrolimex Information Technology is expected to generate 2.01 times more return on investment than Vietnam Rubber. However, Petrolimex Information is 2.01 times more volatile than Vietnam Rubber Group. It trades about 0.01 of its potential returns per unit of risk. Vietnam Rubber Group is currently generating about -0.14 per unit of risk. If you would invest  2,730,000  in Petrolimex Information Technology on September 30, 2024 and sell it today you would lose (20,000) from holding Petrolimex Information Technology or give up 0.73% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	60.61%
Values	Daily Returns

Petrolimex Information Technol  vs.  Vietnam Rubber Group

Petrolimex Information

Risk-Adjusted Performance

0 of 100

Very Weak

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

Vietnam Rubber Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vietnam Rubber Group 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 basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Petrolimex Information and Vietnam Rubber

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

The idea behind Petrolimex Information Technology and Vietnam Rubber Group 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.