Correlation Between Pha Le and PetroVietnam Transportation

Can any of the company-specific risk be diversified away by investing in both Pha Le and PetroVietnam Transportation 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 Pha Le and PetroVietnam Transportation into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Pha Le Plastics and PetroVietnam Transportation Corp, you can compare the effects of market volatilities on Pha Le and PetroVietnam Transportation 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 Pha Le with a short position of PetroVietnam Transportation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pha Le and PetroVietnam Transportation.

Diversification Opportunities for Pha Le and PetroVietnam Transportation

-0.7

Correlation Coefficient

Pha Le  PetroVietnam Transportation

Excellent diversification

The 3 months correlation between Pha and PetroVietnam is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Pha Le Plastics and PetroVietnam Transportation Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PetroVietnam Transportation and Pha Le 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 Pha Le Plastics are associated (or correlated) with PetroVietnam Transportation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PetroVietnam Transportation has no effect on the direction of Pha Le i.e., Pha Le and PetroVietnam Transportation go up and down completely randomly.

Pair Corralation between Pha Le and PetroVietnam Transportation

Assuming the 90 days trading horizon Pha Le Plastics is expected to generate 1.25 times more return on investment than PetroVietnam Transportation. However, Pha Le is 1.25 times more volatile than PetroVietnam Transportation Corp. It trades about 0.12 of its potential returns per unit of risk. PetroVietnam Transportation Corp is currently generating about -0.12 per unit of risk. If you would invest  450,000  in Pha Le Plastics on December 23, 2024 and sell it today you would earn a total of  46,000  from holding Pha Le Plastics or generate 10.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Pha Le Plastics  vs.  PetroVietnam Transportation Co

Pha Le Plastics

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pha Le Plastics are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Pha Le may actually be approaching a critical reversion point that can send shares even higher in April 2025.

PetroVietnam Transportation

Risk-Adjusted Performance

Very Weak

Over the last 90 days PetroVietnam Transportation Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Pha Le and PetroVietnam Transportation

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

The idea behind Pha Le Plastics and PetroVietnam Transportation 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.