Correlation Between Pacific Petroleum and Vietnam Construction

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

Diversification Opportunities for Pacific Petroleum and Vietnam Construction

-0.63
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Pacific and Vietnam is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Pacific Petroleum Transportati and Vietnam Construction JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vietnam 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 Vietnam Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vietnam Construction JSC has no effect on the direction of Pacific Petroleum i.e., Pacific Petroleum and Vietnam Construction go up and down completely randomly.

Pair Corralation between Pacific Petroleum and Vietnam Construction

Assuming the 90 days trading horizon Pacific Petroleum Transportation is expected to generate 1.3 times more return on investment than Vietnam Construction. However, Pacific Petroleum is 1.3 times more volatile than Vietnam Construction JSC. It trades about 0.06 of its potential returns per unit of risk. Vietnam Construction JSC is currently generating about 0.02 per unit of risk. If you would invest  1,056,557  in Pacific Petroleum Transportation on October 11, 2024 and sell it today you would earn a total of  673,443  from holding Pacific Petroleum Transportation or generate 63.74% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Pacific Petroleum Transportati  vs.  Vietnam Construction JSC

 Performance 
       Timeline  
Pacific Petroleum 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Pacific Petroleum Transportation are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Pacific Petroleum may actually be approaching a critical reversion point that can send shares even higher in February 2025.
Vietnam Construction JSC 

Risk-Adjusted Performance

0 of 100

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

Pacific Petroleum and Vietnam Construction Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Pacific Petroleum and Vietnam Construction

The main advantage of trading using opposite Pacific Petroleum and Vietnam Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pacific Petroleum position performs unexpectedly, Vietnam 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 Vietnam Construction will offset losses from the drop in Vietnam Construction's long position.
The idea behind Pacific Petroleum Transportation and Vietnam 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.

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