Correlation Between Binh Duong and Petrolimex Petrochemical

Can any of the company-specific risk be diversified away by investing in both Binh Duong and Petrolimex Petrochemical 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 Binh Duong and Petrolimex Petrochemical into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Binh Duong Trade and Petrolimex Petrochemical JSC, you can compare the effects of market volatilities on Binh Duong and Petrolimex Petrochemical 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 Binh Duong with a short position of Petrolimex Petrochemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Binh Duong and Petrolimex Petrochemical.

Diversification Opportunities for Binh Duong and Petrolimex Petrochemical

0.49

Correlation Coefficient

Binh Duong  Petrolimex Petrochemical

Very weak diversification

The 3 months correlation between Binh and Petrolimex is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Binh Duong Trade and Petrolimex Petrochemical JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petrolimex Petrochemical and Binh Duong 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 Binh Duong Trade are associated (or correlated) with Petrolimex Petrochemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petrolimex Petrochemical has no effect on the direction of Binh Duong i.e., Binh Duong and Petrolimex Petrochemical go up and down completely randomly.

Pair Corralation between Binh Duong and Petrolimex Petrochemical

Assuming the 90 days trading horizon Binh Duong Trade is expected to generate 1.06 times more return on investment than Petrolimex Petrochemical. However, Binh Duong is 1.06 times more volatile than Petrolimex Petrochemical JSC. It trades about 0.03 of its potential returns per unit of risk. Petrolimex Petrochemical JSC is currently generating about 0.01 per unit of risk. If you would invest  1,015,000  in Binh Duong Trade on October 27, 2024 and sell it today you would earn a total of  215,000  from holding Binh Duong Trade or generate 21.18% return on investment over 90 days.

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

Binh Duong Trade  vs.  Petrolimex Petrochemical JSC

Binh Duong Trade

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Binh Duong Trade are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Binh Duong displayed solid returns over the last few months and may actually be approaching a breakup point.

Petrolimex Petrochemical

Risk-Adjusted Performance

5 of 100

Modest

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

Pair Trading with Binh Duong and Petrolimex Petrochemical

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

The idea behind Binh Duong Trade and Petrolimex Petrochemical 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 Global Correlations module to find global opportunities by holding instruments from different markets.