Correlation Between PetroVietnam Drilling and VTC Telecommunicatio

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

Diversification Opportunities for PetroVietnam Drilling and VTC Telecommunicatio

-0.34

Correlation Coefficient

PetroVietnam Drilling  VTC Telecommunicatio

Very good diversification

The 3 months correlation between PetroVietnam and VTC is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding PetroVietnam Drilling Well and VTC Telecommunications JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VTC Telecommunications 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 VTC Telecommunicatio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VTC Telecommunications has no effect on the direction of PetroVietnam Drilling i.e., PetroVietnam Drilling and VTC Telecommunicatio go up and down completely randomly.

Pair Corralation between PetroVietnam Drilling and VTC Telecommunicatio

Assuming the 90 days trading horizon PetroVietnam Drilling Well is expected to under-perform the VTC Telecommunicatio. But the stock apears to be less risky and, when comparing its historical volatility, PetroVietnam Drilling Well is 1.8 times less risky than VTC Telecommunicatio. The stock trades about -0.12 of its potential returns per unit of risk. The VTC Telecommunications JSC is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  820,000  in VTC Telecommunications JSC on October 7, 2024 and sell it today you would lose (10,000) from holding VTC Telecommunications JSC or give up 1.22% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.7%
Values	Daily Returns

PetroVietnam Drilling Well  vs.  VTC Telecommunications JSC

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 weak 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.

VTC Telecommunications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VTC Telecommunications JSC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, VTC Telecommunicatio 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 VTC Telecommunicatio

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

The idea behind PetroVietnam Drilling Well and VTC Telecommunications 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.