Correlation Between PetroVietnam Drilling and Hanoi Plastics

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

Diversification Opportunities for PetroVietnam Drilling and Hanoi Plastics

0.03

Correlation Coefficient

PetroVietnam Drilling  Hanoi Plastics

Significant diversification

The 3 months correlation between PetroVietnam and Hanoi is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding PetroVietnam Drilling Well and Hanoi Plastics JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanoi Plastics JSC 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 Hanoi Plastics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanoi Plastics JSC has no effect on the direction of PetroVietnam Drilling i.e., PetroVietnam Drilling and Hanoi Plastics go up and down completely randomly.

Pair Corralation between PetroVietnam Drilling and Hanoi Plastics

Assuming the 90 days trading horizon PetroVietnam Drilling Well is expected to under-perform the Hanoi Plastics. But the stock apears to be less risky and, when comparing its historical volatility, PetroVietnam Drilling Well is 1.11 times less risky than Hanoi Plastics. The stock trades about -0.04 of its potential returns per unit of risk. The Hanoi Plastics JSC is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,325,000  in Hanoi Plastics JSC on December 24, 2024 and sell it today you would earn a total of  40,000  from holding Hanoi Plastics JSC or generate 3.02% return on investment over 90 days.

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

PetroVietnam Drilling Well  vs.  Hanoi Plastics JSC

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 current stock price disarray, may contribute to short-term losses for the investors.

Hanoi Plastics JSC

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hanoi Plastics JSC are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical indicators, Hanoi Plastics is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with PetroVietnam Drilling and Hanoi Plastics

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

The idea behind PetroVietnam Drilling Well and Hanoi Plastics JSC 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.