Correlation Between Century Synthetic and Vietnam Petroleum

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

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

Diversification Opportunities for Century Synthetic and Vietnam Petroleum

0.7

Correlation Coefficient

Century Synthetic  Vietnam Petroleum

Poor diversification

The 3 months correlation between Century and Vietnam is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Century Synthetic Fiber and Vietnam Petroleum Transport in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vietnam Petroleum and Century Synthetic 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 Century Synthetic Fiber 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 Century Synthetic i.e., Century Synthetic and Vietnam Petroleum go up and down completely randomly.

Pair Corralation between Century Synthetic and Vietnam Petroleum

Assuming the 90 days trading horizon Century Synthetic Fiber is expected to generate 1.0 times more return on investment than Vietnam Petroleum. However, Century Synthetic is 1.0 times more volatile than Vietnam Petroleum Transport. It trades about 0.05 of its potential returns per unit of risk. Vietnam Petroleum Transport is currently generating about 0.03 per unit of risk. If you would invest  2,475,000  in Century Synthetic Fiber on December 30, 2024 and sell it today you would earn a total of  100,000  from holding Century Synthetic Fiber or generate 4.04% return on investment over 90 days.

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

Century Synthetic Fiber  vs.  Vietnam Petroleum Transport

Century Synthetic Fiber

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Century Synthetic Fiber are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward-looking signals, Century Synthetic is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Vietnam Petroleum

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Vietnam Petroleum Transport are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Vietnam 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 Century Synthetic and Vietnam Petroleum

The main advantage of trading using opposite Century Synthetic and Vietnam Petroleum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Century Synthetic 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 Century Synthetic Fiber 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.