Correlation Between PetroVietnam Drilling and Industrial Urban

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

By analyzing existing cross correlation between PetroVietnam Drilling Well and Industrial Urban Development, you can compare the effects of market volatilities on PetroVietnam Drilling and Industrial Urban 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 Industrial Urban. Check out your portfolio center. Please also check ongoing floating volatility patterns of PetroVietnam Drilling and Industrial Urban.

Diversification Opportunities for PetroVietnam Drilling and Industrial Urban

0.28

Correlation Coefficient

PetroVietnam Drilling  Industrial Urban

Modest diversification

The 3 months correlation between PetroVietnam and Industrial is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding PetroVietnam Drilling Well and Industrial Urban Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrial Urban Dev 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 Well are associated (or correlated) with Industrial Urban. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrial Urban Dev has no effect on the direction of PetroVietnam Drilling i.e., PetroVietnam Drilling and Industrial Urban go up and down completely randomly.

Pair Corralation between PetroVietnam Drilling and Industrial Urban

Assuming the 90 days trading horizon PetroVietnam Drilling Well is expected to under-perform the Industrial Urban. But the stock apears to be less risky and, when comparing its historical volatility, PetroVietnam Drilling Well is 1.2 times less risky than Industrial Urban. The stock trades about -0.05 of its potential returns per unit of risk. The Industrial Urban Development is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest  3,160,000  in Industrial Urban Development on December 30, 2024 and sell it today you would earn a total of  1,080,000  from holding Industrial Urban Development or generate 34.18% return on investment over 90 days.

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

PetroVietnam Drilling Well  vs.  Industrial Urban Development

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.

Industrial Urban Dev

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial Urban Development are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Industrial Urban displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PetroVietnam Drilling and Industrial Urban

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

The idea behind PetroVietnam Drilling Well and Industrial Urban Development 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.