Correlation Between PV2 Investment and PetroVietnam Drilling

Can any of the company-specific risk be diversified away by investing in both PV2 Investment and PetroVietnam Drilling 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 PV2 Investment and PetroVietnam Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PV2 Investment JSC and PetroVietnam Drilling Well, you can compare the effects of market volatilities on PV2 Investment and PetroVietnam Drilling 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 PV2 Investment with a short position of PetroVietnam Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of PV2 Investment and PetroVietnam Drilling.

Diversification Opportunities for PV2 Investment and PetroVietnam Drilling

0.15

Correlation Coefficient

PV2 Investment  PetroVietnam Drilling

Average diversification

The 3 months correlation between PV2 and PetroVietnam is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding PV2 Investment JSC and PetroVietnam Drilling Well in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PetroVietnam Drilling and PV2 Investment 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 PV2 Investment JSC are associated (or correlated) with PetroVietnam Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PetroVietnam Drilling has no effect on the direction of PV2 Investment i.e., PV2 Investment and PetroVietnam Drilling go up and down completely randomly.

Pair Corralation between PV2 Investment and PetroVietnam Drilling

Assuming the 90 days trading horizon PV2 Investment JSC is expected to generate 3.97 times more return on investment than PetroVietnam Drilling. However, PV2 Investment is 3.97 times more volatile than PetroVietnam Drilling Well. It trades about 0.12 of its potential returns per unit of risk. PetroVietnam Drilling Well is currently generating about -0.05 per unit of risk. If you would invest  250,000  in PV2 Investment JSC on December 30, 2024 and sell it today you would earn a total of  80,000  from holding PV2 Investment JSC or generate 32.0% return on investment over 90 days.

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

PV2 Investment JSC  vs.  PetroVietnam Drilling Well

PV2 Investment JSC

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PV2 Investment JSC are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, PV2 Investment displayed solid returns over the last few months and may actually be approaching a breakup point.

PetroVietnam Drilling

Risk-Adjusted Performance

Very Weak

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

Pair Trading with PV2 Investment and PetroVietnam Drilling

The main advantage of trading using opposite PV2 Investment and PetroVietnam Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PV2 Investment position performs unexpectedly, PetroVietnam Drilling 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 Drilling will offset losses from the drop in PetroVietnam Drilling's long position.

The idea behind PV2 Investment JSC and PetroVietnam Drilling Well 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.