Correlation Between PetroVietnam Drilling and Elcom Technology

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

Diversification Opportunities for PetroVietnam Drilling and Elcom Technology

-0.68

Correlation Coefficient

PetroVietnam Drilling  Elcom Technology

Excellent diversification

The 3 months correlation between PetroVietnam and Elcom is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding PetroVietnam Drilling Well and Elcom Technology Communication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elcom Technology Com 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 Elcom Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elcom Technology Com has no effect on the direction of PetroVietnam Drilling i.e., PetroVietnam Drilling and Elcom Technology go up and down completely randomly.

Pair Corralation between PetroVietnam Drilling and Elcom Technology

Assuming the 90 days trading horizon PetroVietnam Drilling Well is expected to under-perform the Elcom Technology. But the stock apears to be less risky and, when comparing its historical volatility, PetroVietnam Drilling Well is 1.09 times less risky than Elcom Technology. The stock trades about -0.18 of its potential returns per unit of risk. The Elcom Technology Communications is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  2,660,000  in Elcom Technology Communications on October 8, 2024 and sell it today you would lose (40,000) from holding Elcom Technology Communications or give up 1.5% of portfolio value over 90 days.

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

PetroVietnam Drilling Well  vs.  Elcom Technology Communication

PetroVietnam Drilling

Risk-Adjusted Performance

0 of 100

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 unfluctuating performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Elcom Technology Com

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Elcom Technology Communications are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Elcom Technology may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with PetroVietnam Drilling and Elcom Technology

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

The idea behind PetroVietnam Drilling Well and Elcom Technology Communications 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.