Correlation Between Petrovietnam Drilling and Tin Nghia

Can any of the company-specific risk be diversified away by investing in both Petrovietnam Drilling and Tin Nghia 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 Tin Nghia 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 Tin Nghia Industrial, you can compare the effects of market volatilities on Petrovietnam Drilling and Tin Nghia 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 Tin Nghia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Petrovietnam Drilling and Tin Nghia.

Diversification Opportunities for Petrovietnam Drilling and Tin Nghia

0.76

Correlation Coefficient

Petrovietnam Drilling  Tin Nghia

Poor diversification

The 3 months correlation between Petrovietnam and Tin is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Petrovietnam Drilling Mud and Tin Nghia Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tin Nghia Industrial 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 Tin Nghia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tin Nghia Industrial has no effect on the direction of Petrovietnam Drilling i.e., Petrovietnam Drilling and Tin Nghia go up and down completely randomly.

Pair Corralation between Petrovietnam Drilling and Tin Nghia

Assuming the 90 days trading horizon Petrovietnam Drilling Mud is expected to generate 1.18 times more return on investment than Tin Nghia. However, Petrovietnam Drilling is 1.18 times more volatile than Tin Nghia Industrial. It trades about 0.09 of its potential returns per unit of risk. Tin Nghia Industrial is currently generating about 0.04 per unit of risk. If you would invest  1,060,000  in Petrovietnam Drilling Mud on December 30, 2024 and sell it today you would earn a total of  70,000  from holding Petrovietnam Drilling Mud or generate 6.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

Petrovietnam Drilling Mud  vs.  Tin Nghia Industrial

Petrovietnam Drilling Mud

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Petrovietnam Drilling Mud are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Petrovietnam Drilling may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Tin Nghia Industrial

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tin Nghia Industrial are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Tin Nghia 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 Tin Nghia

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

The idea behind Petrovietnam Drilling Mud and Tin Nghia Industrial 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.