Correlation Between Saigon Machinery and Vietnam Petroleum

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

By analyzing existing cross correlation between Saigon Machinery Spare and Vietnam Petroleum Transport, you can compare the effects of market volatilities on Saigon Machinery and Vietnam Petroleum 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 Machinery with a short position of Vietnam Petroleum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Saigon Machinery and Vietnam Petroleum.

Diversification Opportunities for Saigon Machinery and Vietnam Petroleum

0.52

Correlation Coefficient

Saigon Machinery  Vietnam Petroleum

Very weak diversification

The 3 months correlation between Saigon and Vietnam is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Saigon Machinery Spare and Vietnam Petroleum Transport in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vietnam Petroleum and Saigon Machinery 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 Machinery Spare are associated (or correlated) with Vietnam Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vietnam Petroleum has no effect on the direction of Saigon Machinery i.e., Saigon Machinery and Vietnam Petroleum go up and down completely randomly.

Pair Corralation between Saigon Machinery and Vietnam Petroleum

Assuming the 90 days trading horizon Saigon Machinery Spare is expected to generate 1.74 times more return on investment than Vietnam Petroleum. However, Saigon Machinery is 1.74 times more volatile than Vietnam Petroleum Transport. It trades about 0.08 of its potential returns per unit of risk. Vietnam Petroleum Transport is currently generating about 0.07 per unit of risk. If you would invest  652,364  in Saigon Machinery Spare on October 4, 2024 and sell it today you would earn a total of  727,636  from holding Saigon Machinery Spare or generate 111.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	60.57%
Values	Daily Returns

Saigon Machinery Spare  vs.  Vietnam Petroleum Transport

Saigon Machinery Spare

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Saigon Machinery Spare are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Saigon Machinery displayed solid returns over the last few months and may actually be approaching a breakup point.

Vietnam Petroleum

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vietnam Petroleum Transport are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Vietnam Petroleum may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Saigon Machinery and Vietnam Petroleum

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

The idea behind Saigon Machinery Spare and Vietnam Petroleum Transport 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.