Correlation Between Petrolimex International and BIDV Insurance

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

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

Diversification Opportunities for Petrolimex International and BIDV Insurance

-0.35

Correlation Coefficient

Petrolimex International  BIDV Insurance

Very good diversification

The 3 months correlation between Petrolimex and BIDV is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Petrolimex International Tradi and BIDV Insurance Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BIDV Insurance Corp and Petrolimex International 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 International Trading are associated (or correlated) with BIDV Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BIDV Insurance Corp has no effect on the direction of Petrolimex International i.e., Petrolimex International and BIDV Insurance go up and down completely randomly.

Pair Corralation between Petrolimex International and BIDV Insurance

Assuming the 90 days trading horizon Petrolimex International Trading is expected to under-perform the BIDV Insurance. In addition to that, Petrolimex International is 1.71 times more volatile than BIDV Insurance Corp. It trades about -0.02 of its total potential returns per unit of risk. BIDV Insurance Corp is currently generating about 0.11 per unit of volatility. If you would invest  3,150,000  in BIDV Insurance Corp on September 13, 2024 and sell it today you would earn a total of  310,000  from holding BIDV Insurance Corp or generate 9.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.85%
Values	Daily Returns

Petrolimex International Tradi  vs.  BIDV Insurance Corp

Petrolimex International

Risk-Adjusted Performance

0 of 100

Very Weak

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

BIDV Insurance Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BIDV Insurance Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, BIDV Insurance may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Petrolimex International and BIDV Insurance

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

The idea behind Petrolimex International Trading and BIDV Insurance Corp 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.