Correlation Between Sao Vang and Materials Petroleum

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

By analyzing existing cross correlation between Sao Vang Rubber and Materials Petroleum JSC, you can compare the effects of market volatilities on Sao Vang and Materials 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 Sao Vang with a short position of Materials Petroleum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sao Vang and Materials Petroleum.

Diversification Opportunities for Sao Vang and Materials Petroleum

-0.2

Correlation Coefficient

Sao Vang  Materials Petroleum

Good diversification

The 3 months correlation between Sao and Materials is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Sao Vang Rubber and Materials Petroleum JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Materials Petroleum JSC and Sao Vang 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 Sao Vang Rubber are associated (or correlated) with Materials Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Materials Petroleum JSC has no effect on the direction of Sao Vang i.e., Sao Vang and Materials Petroleum go up and down completely randomly.

Pair Corralation between Sao Vang and Materials Petroleum

Assuming the 90 days trading horizon Sao Vang Rubber is expected to under-perform the Materials Petroleum. But the stock apears to be less risky and, when comparing its historical volatility, Sao Vang Rubber is 1.1 times less risky than Materials Petroleum. The stock trades about -0.05 of its potential returns per unit of risk. The Materials Petroleum JSC is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  2,850,000  in Materials Petroleum JSC on October 8, 2024 and sell it today you would lose (65,000) from holding Materials Petroleum JSC or give up 2.28% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.92%
Values	Daily Returns

Sao Vang Rubber  vs.  Materials Petroleum JSC

Sao Vang Rubber

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sao Vang Rubber has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Materials Petroleum JSC

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Sao Vang and Materials Petroleum

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

The idea behind Sao Vang Rubber and Materials Petroleum JSC 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.