Correlation Between PetroVietnam Transportation and Vina2 Investment

Can any of the company-specific risk be diversified away by investing in both PetroVietnam Transportation and Vina2 Investment 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 Vina2 Investment 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 Vina2 Investment and, you can compare the effects of market volatilities on PetroVietnam Transportation and Vina2 Investment 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 Vina2 Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of PetroVietnam Transportation and Vina2 Investment.

Diversification Opportunities for PetroVietnam Transportation and Vina2 Investment

-0.28

Correlation Coefficient

PetroVietnam Transportation  Vina2 Investment

Very good diversification

The 3 months correlation between PetroVietnam and Vina2 is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding PetroVietnam Transportation Co and Vina2 Investment and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vina2 Investment 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 Vina2 Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vina2 Investment has no effect on the direction of PetroVietnam Transportation i.e., PetroVietnam Transportation and Vina2 Investment go up and down completely randomly.

Pair Corralation between PetroVietnam Transportation and Vina2 Investment

Assuming the 90 days trading horizon PetroVietnam Transportation is expected to generate 1.92 times less return on investment than Vina2 Investment. But when comparing it to its historical volatility, PetroVietnam Transportation Corp is 2.42 times less risky than Vina2 Investment. It trades about 0.03 of its potential returns per unit of risk. Vina2 Investment and is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  950,000  in Vina2 Investment and on October 6, 2024 and sell it today you would earn a total of  10,000  from holding Vina2 Investment and or generate 1.05% return on investment over 90 days.

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

PetroVietnam Transportation Co  vs.  Vina2 Investment and

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

Vina2 Investment

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vina2 Investment and are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Vina2 Investment displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PetroVietnam Transportation and Vina2 Investment

The main advantage of trading using opposite PetroVietnam Transportation and Vina2 Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PetroVietnam Transportation position performs unexpectedly, Vina2 Investment 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 Vina2 Investment will offset losses from the drop in Vina2 Investment's long position.

The idea behind PetroVietnam Transportation Corp and Vina2 Investment and 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.