Correlation Between Petrovietnam Drilling and PetroVietnam Transportation

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

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

Diversification Opportunities for Petrovietnam Drilling and PetroVietnam Transportation

0.74

Correlation Coefficient

Petrovietnam Drilling  PetroVietnam Transportation

Poor diversification

The 3 months correlation between Petrovietnam and PetroVietnam is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Petrovietnam Drilling Mud and PetroVietnam Transportation Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PetroVietnam Transportation and Petrovietnam Drilling 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 Petrovietnam Drilling Mud 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 Petrovietnam Drilling i.e., Petrovietnam Drilling and PetroVietnam Transportation go up and down completely randomly.

Pair Corralation between Petrovietnam Drilling and PetroVietnam Transportation

Assuming the 90 days trading horizon Petrovietnam Drilling Mud is expected to generate 2.28 times more return on investment than PetroVietnam Transportation. However, Petrovietnam Drilling is 2.28 times more volatile than PetroVietnam Transportation Corp. It trades about 0.19 of its potential returns per unit of risk. PetroVietnam Transportation Corp is currently generating about 0.22 per unit of risk. If you would invest  1,020,000  in Petrovietnam Drilling Mud on September 20, 2024 and sell it today you would earn a total of  80,000  from holding Petrovietnam Drilling Mud or generate 7.84% return on investment over 90 days.

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

Petrovietnam Drilling Mud  vs.  PetroVietnam Transportation Co

Petrovietnam Drilling Mud

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Petrovietnam Drilling Mud has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm 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 Petrovietnam Drilling and PetroVietnam Transportation

The main advantage of trading using opposite Petrovietnam Drilling and PetroVietnam Transportation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Petrovietnam Drilling 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 Petrovietnam Drilling Mud 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.