Correlation Between PetroVietnam Transportation and Petrovietnam Drilling

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

Diversification Opportunities for PetroVietnam Transportation and Petrovietnam Drilling

0.74

Correlation Coefficient

PetroVietnam Transportation  Petrovietnam Drilling

Poor diversification

The 3 months correlation between PetroVietnam and Petrovietnam is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding PetroVietnam Transportation Co and Petrovietnam Drilling Mud in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petrovietnam Drilling Mud 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 Petrovietnam Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petrovietnam Drilling Mud has no effect on the direction of PetroVietnam Transportation i.e., PetroVietnam Transportation and Petrovietnam Drilling go up and down completely randomly.

Pair Corralation between PetroVietnam Transportation and Petrovietnam Drilling

Assuming the 90 days trading horizon PetroVietnam Transportation Corp is expected to generate 0.84 times more return on investment than Petrovietnam Drilling. However, PetroVietnam Transportation Corp is 1.19 times less risky than Petrovietnam Drilling. It trades about 0.04 of its potential returns per unit of risk. Petrovietnam Drilling Mud is currently generating about 0.03 per unit of risk. If you would invest  1,955,753  in PetroVietnam Transportation Corp on September 20, 2024 and sell it today you would earn a total of  799,247  from holding PetroVietnam Transportation Corp or generate 40.87% return on investment over 90 days.

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

PetroVietnam Transportation Co  vs.  Petrovietnam Drilling Mud

PetroVietnam Transportation

Risk-Adjusted Performance

0 of 100

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 current stock price disarray, may contribute to short-term losses for the investors.

Petrovietnam Drilling Mud

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Petrovietnam Drilling Mud 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 fundamental 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.

Pair Trading with PetroVietnam Transportation and Petrovietnam Drilling

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

The idea behind PetroVietnam Transportation Corp and Petrovietnam Drilling Mud 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.