Correlation Between PVI Reinsurance and PetroVietnam Transportation

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

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

Diversification Opportunities for PVI Reinsurance and PetroVietnam Transportation

-0.1

Correlation Coefficient

PVI Reinsurance  PetroVietnam Transportation

Good diversification

The 3 months correlation between PVI and PetroVietnam is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding PVI Reinsurance Corp and PetroVietnam Transportation Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PetroVietnam Transportation and PVI Reinsurance 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 PVI Reinsurance Corp 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 PVI Reinsurance i.e., PVI Reinsurance and PetroVietnam Transportation go up and down completely randomly.

Pair Corralation between PVI Reinsurance and PetroVietnam Transportation

Assuming the 90 days trading horizon PVI Reinsurance is expected to generate 1.71 times less return on investment than PetroVietnam Transportation. In addition to that, PVI Reinsurance is 1.31 times more volatile than PetroVietnam Transportation Corp. It trades about 0.02 of its total potential returns per unit of risk. PetroVietnam Transportation Corp is currently generating about 0.04 per unit of volatility. If you would invest  1,955,753  in PetroVietnam Transportation Corp on September 20, 2024 and sell it today you would earn a total of  799,247  from holding PetroVietnam Transportation Corp or generate 40.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	77.85%
Values	Daily Returns

PVI Reinsurance Corp  vs.  PetroVietnam Transportation Co

PVI Reinsurance Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PVI Reinsurance Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, PVI Reinsurance is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

PetroVietnam Transportation

Risk-Adjusted Performance

0 of 100

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 very healthy basic indicators, PetroVietnam Transportation is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with PVI Reinsurance and PetroVietnam Transportation

The main advantage of trading using opposite PVI Reinsurance and PetroVietnam Transportation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PVI Reinsurance 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 PVI Reinsurance Corp 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.

Check out your portfolio center.

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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.