Correlation Between PetroVietnam Transportation and Vietnam Rubber

Can any of the company-specific risk be diversified away by investing in both PetroVietnam Transportation and Vietnam Rubber 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 Transportation and Vietnam Rubber into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PetroVietnam Transportation Corp and Vietnam Rubber Group, you can compare the effects of market volatilities on PetroVietnam Transportation and Vietnam Rubber 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 Transportation with a short position of Vietnam Rubber. Check out your portfolio center. Please also check ongoing floating volatility patterns of PetroVietnam Transportation and Vietnam Rubber.

Diversification Opportunities for PetroVietnam Transportation and Vietnam Rubber

0.44

Correlation Coefficient

PetroVietnam Transportation  Vietnam Rubber

Very weak diversification

The 3 months correlation between PetroVietnam and Vietnam is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding PetroVietnam Transportation Co and Vietnam Rubber Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vietnam Rubber Group and PetroVietnam Transportation 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 Transportation Corp are associated (or correlated) with Vietnam Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vietnam Rubber Group has no effect on the direction of PetroVietnam Transportation i.e., PetroVietnam Transportation and Vietnam Rubber go up and down completely randomly.

Pair Corralation between PetroVietnam Transportation and Vietnam Rubber

Assuming the 90 days trading horizon PetroVietnam Transportation is expected to generate 2.15 times less return on investment than Vietnam Rubber. But when comparing it to its historical volatility, PetroVietnam Transportation Corp is 1.23 times less risky than Vietnam Rubber. It trades about 0.05 of its potential returns per unit of risk. Vietnam Rubber Group is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,454,635  in Vietnam Rubber Group on December 2, 2024 and sell it today you would earn a total of  1,885,365  from holding Vietnam Rubber Group or generate 129.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

PetroVietnam Transportation Co  vs.  Vietnam Rubber Group

PetroVietnam Transportation

Risk-Adjusted Performance

Very Weak

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

Vietnam Rubber Group

Risk-Adjusted Performance

Modest

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

Pair Trading with PetroVietnam Transportation and Vietnam Rubber

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

The idea behind PetroVietnam Transportation Corp and Vietnam Rubber Group 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.