Correlation Between Petrolimex Petrochemical and Danang Education

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

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

Diversification Opportunities for Petrolimex Petrochemical and Danang Education

0.11

Correlation Coefficient

Petrolimex Petrochemical  Danang Education

Average diversification

The 3 months correlation between Petrolimex and Danang is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Petrolimex Petrochemical JSC and Danang Education Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Danang Education Inv and Petrolimex Petrochemical 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 Petrochemical JSC are associated (or correlated) with Danang Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Danang Education Inv has no effect on the direction of Petrolimex Petrochemical i.e., Petrolimex Petrochemical and Danang Education go up and down completely randomly.

Pair Corralation between Petrolimex Petrochemical and Danang Education

Assuming the 90 days trading horizon Petrolimex Petrochemical JSC is expected to generate 0.88 times more return on investment than Danang Education. However, Petrolimex Petrochemical JSC is 1.14 times less risky than Danang Education. It trades about 0.14 of its potential returns per unit of risk. Danang Education Investment is currently generating about 0.01 per unit of risk. If you would invest  2,080,000  in Petrolimex Petrochemical JSC on December 24, 2024 and sell it today you would earn a total of  390,000  from holding Petrolimex Petrochemical JSC or generate 18.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	75.86%
Values	Daily Returns

Petrolimex Petrochemical JSC  vs.  Danang Education Investment

Petrolimex Petrochemical

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Petrolimex Petrochemical JSC are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Petrolimex Petrochemical displayed solid returns over the last few months and may actually be approaching a breakup point.

Danang Education Inv

Risk-Adjusted Performance

Very Weak

Over the last 90 days Danang Education Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Danang Education 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 Petrochemical and Danang Education

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

The idea behind Petrolimex Petrochemical JSC and Danang Education Investment 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.