Correlation Between PetroVietnam Drilling and Vina2 Investment

Can any of the company-specific risk be diversified away by investing in both PetroVietnam Drilling and Vina2 Investment 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 Vina2 Investment 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 Vina2 Investment and, you can compare the effects of market volatilities on PetroVietnam Drilling and Vina2 Investment 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 Vina2 Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of PetroVietnam Drilling and Vina2 Investment.

Diversification Opportunities for PetroVietnam Drilling and Vina2 Investment

0.15

Correlation Coefficient

PetroVietnam Drilling  Vina2 Investment

Average diversification

The 3 months correlation between PetroVietnam and Vina2 is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding PetroVietnam Drilling Well and Vina2 Investment and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vina2 Investment 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 Vina2 Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vina2 Investment has no effect on the direction of PetroVietnam Drilling i.e., PetroVietnam Drilling and Vina2 Investment go up and down completely randomly.

Pair Corralation between PetroVietnam Drilling and Vina2 Investment

Assuming the 90 days trading horizon PetroVietnam Drilling Well is expected to generate 0.68 times more return on investment than Vina2 Investment. However, PetroVietnam Drilling Well is 1.48 times less risky than Vina2 Investment. It trades about -0.05 of its potential returns per unit of risk. Vina2 Investment and is currently generating about -0.1 per unit of risk. If you would invest  2,370,000  in PetroVietnam Drilling Well on December 29, 2024 and sell it today you would lose (90,000) from holding PetroVietnam Drilling Well or give up 3.8% of portfolio value over 90 days.

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

PetroVietnam Drilling Well  vs.  Vina2 Investment and

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.

Vina2 Investment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vina2 Investment and has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with PetroVietnam Drilling and Vina2 Investment

The main advantage of trading using opposite PetroVietnam Drilling and Vina2 Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PetroVietnam Drilling position performs unexpectedly, Vina2 Investment 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 Vina2 Investment will offset losses from the drop in Vina2 Investment's long position.

The idea behind PetroVietnam Drilling Well and Vina2 Investment and 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.

Check out your portfolio center.

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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.