Correlation Between Pacific Petroleum and Viettel Construction

Can any of the company-specific risk be diversified away by investing in both Pacific Petroleum and Viettel Construction 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 Pacific Petroleum and Viettel Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Pacific Petroleum Transportation and Viettel Construction JSC, you can compare the effects of market volatilities on Pacific Petroleum and Viettel Construction 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 Pacific Petroleum with a short position of Viettel Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pacific Petroleum and Viettel Construction.

Diversification Opportunities for Pacific Petroleum and Viettel Construction

0.07

Correlation Coefficient

Pacific Petroleum  Viettel Construction

Significant diversification

The 3 months correlation between Pacific and Viettel is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Pacific Petroleum Transportati and Viettel Construction JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Viettel Construction JSC and Pacific Petroleum 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 Pacific Petroleum Transportation are associated (or correlated) with Viettel Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Viettel Construction JSC has no effect on the direction of Pacific Petroleum i.e., Pacific Petroleum and Viettel Construction go up and down completely randomly.

Pair Corralation between Pacific Petroleum and Viettel Construction

Assuming the 90 days trading horizon Pacific Petroleum is expected to generate 1.47 times less return on investment than Viettel Construction. But when comparing it to its historical volatility, Pacific Petroleum Transportation is 1.15 times less risky than Viettel Construction. It trades about 0.07 of its potential returns per unit of risk. Viettel Construction JSC is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  5,690,530  in Viettel Construction JSC on October 26, 2024 and sell it today you would earn a total of  7,469,470  from holding Viettel Construction JSC or generate 131.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Pacific Petroleum Transportati  vs.  Viettel Construction JSC

Pacific Petroleum

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days Pacific Petroleum Transportation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Pacific Petroleum is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Viettel Construction JSC

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days Viettel Construction JSC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Viettel Construction is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Pacific Petroleum and Viettel Construction

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

The idea behind Pacific Petroleum Transportation and Viettel Construction 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.