Correlation Between Saigon Beer and PetroVietnam Drilling

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

By analyzing existing cross correlation between Saigon Beer Alcohol and PetroVietnam Drilling Well, you can compare the effects of market volatilities on Saigon Beer 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 Saigon Beer with a short position of PetroVietnam Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Saigon Beer and PetroVietnam Drilling.

Diversification Opportunities for Saigon Beer and PetroVietnam Drilling

-0.06

Correlation Coefficient

Saigon Beer  PetroVietnam Drilling

Good diversification

The 3 months correlation between Saigon and PetroVietnam is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Saigon Beer Alcohol and PetroVietnam Drilling Well in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PetroVietnam Drilling and Saigon Beer 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 Saigon Beer Alcohol 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 has no effect on the direction of Saigon Beer i.e., Saigon Beer and PetroVietnam Drilling go up and down completely randomly.

Pair Corralation between Saigon Beer and PetroVietnam Drilling

Assuming the 90 days trading horizon Saigon Beer Alcohol is expected to under-perform the PetroVietnam Drilling. But the stock apears to be less risky and, when comparing its historical volatility, Saigon Beer Alcohol is 1.62 times less risky than PetroVietnam Drilling. The stock trades about -0.28 of its potential returns per unit of risk. The PetroVietnam Drilling Well is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  2,370,000  in PetroVietnam Drilling Well on December 29, 2024 and sell it today you would lose (90,000) from holding PetroVietnam Drilling Well or give up 3.8% of portfolio value over 90 days.

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

Saigon Beer Alcohol  vs.  PetroVietnam Drilling Well

Saigon Beer Alcohol

Risk-Adjusted Performance

Very Weak

Over the last 90 days Saigon Beer Alcohol 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 drivers remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

PetroVietnam Drilling

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Saigon Beer and PetroVietnam Drilling

The main advantage of trading using opposite Saigon Beer and PetroVietnam Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Saigon Beer 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 Saigon Beer Alcohol and PetroVietnam Drilling Well 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.