Correlation Between PV2 Investment and Vietnam Dairy

Can any of the company-specific risk be diversified away by investing in both PV2 Investment and Vietnam Dairy 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 Vietnam Dairy 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 Vietnam Dairy Products, you can compare the effects of market volatilities on PV2 Investment and Vietnam Dairy 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 Vietnam Dairy. Check out your portfolio center. Please also check ongoing floating volatility patterns of PV2 Investment and Vietnam Dairy.

Diversification Opportunities for PV2 Investment and Vietnam Dairy

-0.81

Correlation Coefficient

PV2 Investment  Vietnam Dairy

Pay attention - limited upside

The 3 months correlation between PV2 and Vietnam is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding PV2 Investment JSC and Vietnam Dairy Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vietnam Dairy Products 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 Vietnam Dairy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vietnam Dairy Products has no effect on the direction of PV2 Investment i.e., PV2 Investment and Vietnam Dairy go up and down completely randomly.

Pair Corralation between PV2 Investment and Vietnam Dairy

Assuming the 90 days trading horizon PV2 Investment JSC is expected to generate 4.62 times more return on investment than Vietnam Dairy. However, PV2 Investment is 4.62 times more volatile than Vietnam Dairy Products. It trades about 0.2 of its potential returns per unit of risk. Vietnam Dairy Products is currently generating about -0.01 per unit of risk. If you would invest  240,000  in PV2 Investment JSC on December 4, 2024 and sell it today you would earn a total of  140,000  from holding PV2 Investment JSC or generate 58.33% return on investment over 90 days.

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

PV2 Investment JSC  vs.  Vietnam Dairy Products

PV2 Investment JSC

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PV2 Investment JSC are ranked lower than 15 (%) 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.

Vietnam Dairy Products

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vietnam Dairy Products has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Vietnam Dairy 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 Vietnam Dairy

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

The idea behind PV2 Investment JSC and Vietnam Dairy Products 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 Valuation module to check real value of public entities based on technical and fundamental data.