Correlation Between Petrovietnam Technical and AgriBank Securities

Can any of the company-specific risk be diversified away by investing in both Petrovietnam Technical and AgriBank Securities 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 Technical and AgriBank Securities into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Petrovietnam Technical Services and AgriBank Securities JSC, you can compare the effects of market volatilities on Petrovietnam Technical and AgriBank Securities 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 Technical with a short position of AgriBank Securities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Petrovietnam Technical and AgriBank Securities.

Diversification Opportunities for Petrovietnam Technical and AgriBank Securities

0.85

Correlation Coefficient

Petrovietnam Technical  AgriBank Securities

Very poor diversification

The 3 months correlation between Petrovietnam and AgriBank is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Petrovietnam Technical Service and AgriBank Securities JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AgriBank Securities JSC and Petrovietnam Technical 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 Technical Services are associated (or correlated) with AgriBank Securities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AgriBank Securities JSC has no effect on the direction of Petrovietnam Technical i.e., Petrovietnam Technical and AgriBank Securities go up and down completely randomly.

Pair Corralation between Petrovietnam Technical and AgriBank Securities

Assuming the 90 days trading horizon Petrovietnam Technical Services is expected to under-perform the AgriBank Securities. But the stock apears to be less risky and, when comparing its historical volatility, Petrovietnam Technical Services is 1.4 times less risky than AgriBank Securities. The stock trades about -0.19 of its potential returns per unit of risk. The AgriBank Securities JSC is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  1,965,000  in AgriBank Securities JSC on October 1, 2024 and sell it today you would lose (255,000) from holding AgriBank Securities JSC or give up 12.98% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.46%
Values	Daily Returns

Petrovietnam Technical Service  vs.  AgriBank Securities JSC

Petrovietnam Technical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Petrovietnam Technical Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

AgriBank Securities JSC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AgriBank Securities JSC 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 Technical and AgriBank Securities

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

The idea behind Petrovietnam Technical Services and AgriBank Securities 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.