Correlation Between Petrovietnam Technical and Dong A

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

Diversification Opportunities for Petrovietnam Technical and Dong A

0.28

Correlation Coefficient

Petrovietnam Technical  Dong A

Modest diversification

The 3 months correlation between Petrovietnam and Dong is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Petrovietnam Technical Service and Dong A Hotel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dong A Hotel 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 Dong A. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dong A Hotel has no effect on the direction of Petrovietnam Technical i.e., Petrovietnam Technical and Dong A go up and down completely randomly.

Pair Corralation between Petrovietnam Technical and Dong A

Assuming the 90 days trading horizon Petrovietnam Technical Services is expected to under-perform the Dong A. But the stock apears to be less risky and, when comparing its historical volatility, Petrovietnam Technical Services is 2.19 times less risky than Dong A. The stock trades about -0.04 of its potential returns per unit of risk. The Dong A Hotel is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  348,000  in Dong A Hotel on December 24, 2024 and sell it today you would earn a total of  4,000  from holding Dong A Hotel or generate 1.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.31%
Values	Daily Returns

Petrovietnam Technical Service  vs.  Dong A Hotel

Petrovietnam Technical

Risk-Adjusted Performance

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 very healthy basic indicators, Petrovietnam Technical is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Dong A Hotel

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dong A Hotel are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical indicators, Dong A 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 Technical and Dong A

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

The idea behind Petrovietnam Technical Services and Dong A Hotel 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.